Warrior Trading Blog

+$700 Shorting Disney! | Mike’s Trade Recap

Mike's Trading Recap

Hey, what’s up guys? A nice way to start off the week and a Monday morning. In just one hour of trading, we locked up just over $700. We took one trade on Disney, on some follow through action from Friday, we took profit on half the position and was stopped out with the balance for break even. Not a huge trade, but we’ll take it for an hour trading and some good action to talk about. Let’s take a few minutes and break down today’s trade on Disney.

All right, good morning guys. I want to do a recap here, kind of end the day little bit earlier than normal. Market is kind of slow here coming into Easter week. Friday, the market is closed actually for Good Friday. I would expect the action to be kind of slow even though we do have some earnings. Good Friday tends to be a relatively big holiday for the market, so keep that in mind as we move through the week. Let’s talk about today’s trade, and that’s going to be on Disney.

Now, this morning, it was definitely kind of quiet. We didn’t have much on the gap scans. We obviously had Disney from Friday that had potential of continuation. I wanted to keep a close eye on that. We were able to get a trade-off on it. It did play out, but it didn’t actually give us the continuation we wanted, what we were looking for. That said, we were able to still lock up just over 700, 717 on a trade on Disney. We took profit on half, and then we stopped on the balance. Let’s take a few minutes and talk about what happened here on this Disney trade.

Obviously Friday, Disney announced that they were going to launch Disney+, a streaming service, and big move to the stock, right? Big move to the stock. The majority of it was in the gap and in the pre-market. Then, it sold off here into the mid-morning on Friday and kind of just grinded back higher throughout the day. Now, what I liked about this was a couple of things. First off was that big gap higher, nothing above, right? Room to run. We’ve had several of these stocks in the past. This is actually my favorite type of long setup is when you have a gap to new highs, no resistance. These stocks tend to make big moves.

For instance, take a look at XL and X. We traded this thing when it moved, gapped to new highs, earnings gap, huge move from $100 all the way up to 108, 109 on that day. Actually, it started down here at $97 so big move on that. One we traded before that was Garmin. Again, another one that gapped to all-time highs and nothing in its way to run. You can see what type of move we got on that, 76 up to 83s. Big, big move and continuation thereafter, right?

What I was looking for on Disney was the fact that we got the gap to new highs and we had room to run. If we were able to get above Friday’s high, I would look for continuation on this if the market was in our favor. Now, you can see what happened here in the pre-market that we did get above the level. We did hold and we started to push. However, there was one issue with this and that was the market. Now, typically, I won’t trade a follow through day. However, this type of setup where you have room to move in either direction, to the long side or the short side, the only support that we had was really back here at the gap entry, which is going to be down here. You can see which was the lower Friday, 126.36. We had room to fade.

I was watching this for a move below the pivot for a short or a hold above for a long depending on the market. It’s a follow through day. Typically, the momentum is going to be a little bit lighter. It’s not the first day of the news. It’s not the fresh news, so it’s going to be a little bit lighter on momentum. You have to pay a little bit more attention to the market. If you look what happened here on the market, on the spy, we’re moving up on Disney, right? If you look at the spy, look what the difference is, we’re moving down. Okay?

That’s a disconnect, right? You definitely don’t want to be trading against the market on a follow through day on a stock. The fact that we were moving down, that’s what kept me out of this long. That’s what kept me out of this long on Disney was because we were just completely against the market at the open. That’s not something I want to get involved with. I sat tight, I waited. Then, we had this hard pull, kind of caught up to the market, got below the pivot and I actually started a short right in through this level here once we got below that 130.90 which was Friday’s high.

If we look at the faster timeframe and you see what happened here, here’s the big pull. Here’s where we tested the pivot right here. Couple of really important key factors on this, fast timeframe we’re going to talk about here shortly, but make sure you pay attention to this. This is really helpful price action to give you a big advantage. Right?

Right here, you can see we test the pivot. We break, wait for the break to happen, wait for the retest to happen. Come back up, we start to retest, I get short right here. As we retest and fail, I got short at 130.68. All right? 130.68. My stop was going to go back above the pivot, which was right above 131 so roughly a 30, 40 cent stop. Pretty tight. Continuation, we were looking for this thing to really open up down into this pocket.

Started to look really good, right? Rejected, kind of sat here sideways. I actually added right here, 130, 40s, and brought my average down to about 130.55. We broke again. I did take profit as we hit through 130.20, so I took half off just to, at least, get some sort of profit locked up for being in the trade and pay me for my time for be here today. Then, we got a retrace. I’m okay with a retrace, came back up to retest the level, perfectly, right? Rejected it virtually perfectly and then turned back over, came back down and the issue here is we double bottomed. Right? Really important to notice this on the fast timeframe.

You can see that we double bottomed here, and then we started to move back higher. As soon as we did this and we got back above that base to my break even, 130.50, we made a higher low right here, I got out. Right? I got out, stopped the balance [inaudible 00:06:26] my break even and that’s how we locked up the 700. Again, when you see this double bottom action, you got to be really careful. Typically, I just get out of the way. I can always get back in if it comes back down and sets up again. No reason to sit through that retrace. I will sit through retraces as long as the stock, in this case for a short, is making lower lows and lower highs.

As long as we’re making lower lows and lower highs, I have no problem sitting through retracements. As soon as you do this, as soon as you retrace and you come back and you double bottom and you don’t make another low, I’m out. All right? That’s telling me the momentum is not there anymore. It’s likely that the trend is going to shift or it’s exhausted. The current trend is exhausted, so I got out there and decided to call it quits. Then, ended up locking in the 700 for today. We’ll see what happens. If it gets back below 130, I would be interested again.

We’ll keep an eye on this into the afternoon, because it does have room to fade especially if the market remains weak. You can see here that we are now back below this pivot and below Friday’s, or sitting right on Friday’s low, and just broke it right there. We do have some weakness coming into the market today, and that could definitely help this Disney fade. There’s still good, good setup on this. It is starting to resolve, so actually we may revisit this here soon if we do get back below this 130 level.

That was really it for today guys, didn’t really see much action elsewhere. It’s just a slow time in the market right now, but it’s okay. We’ll ride along on the low numbers until we can get big momentum trade again. We’ll take it. Being here for an hour trading today, definitely happy with it. We’ll get back at it first thing tomorrow morning.

Hey everyone, thanks for watching the videos. I’ll continue to make sure that all of the watch list, as well as the recaps, are available to all of you. Make sure you subscribe to keep up to date on what’s hot and what’s not in the market.