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Warrior Trading Blog

A $2K Tuesday! | Mike’s Trade Recap

Mike_7.16

Hey, what’s up guys? Well, trading continues to be relatively slow here as we progress through the middle of summer, but again, it’s normal. Just have to acknowledge that it’s definitely going to be lighter action than when we’re normally used to, but just have to work with what we’ve got. But today we were able to lock up just over 2000 bucks on one single trade in Wells Fargo. The banks have been starting to report earnings, hasn’t been much opportunity, but we were able to catch a late morning trade on Wells Fargo for just over 2000. So let’s take a few minutes and breakdown this morning trade.

Alright, good morning guys. I’m going to take a few minutes here to recap today’s action, which initially looked like we had quite a few names to keep an eye on here coming into the open. But there was a little bit of an issue in that we had a bunch of conference calls that either took place at the open at 9:30 or that were starting at 10:00 am. And usually any conference call that either starts at the open, or even 10:00 am, makes it very difficult to trade out of the open. Because what happens is is that a lot of the market participants that are responsible for moving these stocks really wait. They wait until the conference call has concluded because there’s a lot of unknown. And in the conference call there could be a number of things said, it could be digested in a number of different ways. So it’s really an unknown risk. And when you’re moving a lot of money or a big position around the market, you want everything known that you can, and the conference call’s unknown risk.

So typically what we see happen is we don’t see much action until those conference calls are over. And that’s basically what happened today is a couple of the names that were on watch, including Goldman Sachs, DPZ and Wells Fargo, they all had conference calls early and it made it tough to find any action. But later in the morning we were able to lock up just over 2000 bucks on a trade on Wells Fargo that we’ll talk about here in the recap.

So first off, again, like I said, Goldman Sachs was on the list. This one had a very interesting technical setup over this 21750 trendline, just couldn’t get above it. Really nice pocket on this. If it could break that trendline, nice clean move tipped to be had if you got above that, but couldn’t break the trendline, plus a conference call, they open in the market. That’s not going to help the situation. So that one we didn’t trade.

DPZ, this was a 10:00 am conference call. Had a really interesting set up for a hard fade below these macro ascending support trendlines as you see we have drawn here. But again, 10:00 am conference call and you weren’t really able to make that momentum move below the trendline, there’s just not really a trade there. You can see how they open, it popped, rejected the first pivot, came back down, tested this trendline, just been kind of sideways. And again, I don’t really take a trade before a call happens, and you can see we’re after the call now and there just really hasn’t been much action. So it’s one of those situations where you really have to wait. And while this was a decent move, a pretty big move on DPZ, the stock is a very difficult stock to trade. It always is. Trades quite spready. It’s tough to manage.

So I really try to stay away from this one unless there’s some very significant technical setup. Which if we did break down below this trendline on volume, and we didn’t have a conference call to fight, then I would have been very likely to trade this, because you had some nice pockets to open up into. But again, had to sit tight on it and it just never really set up for me because it stayed within the two major support and resistance points. So that was DPZ.

Again GS. And then we had WFC, which was on my list as the most interesting out of the open because of the technical set up on this. So let’s just break this down here and talk about why this was the best look technically. So first off here you have to notice the daily chart. This thing has been beaten down quite a bit over the past year. It’s every pop’s been sold. It hasn’t really been able to reclaim any sort of major resistance, and it’s just been a tough road here and every pop gets sold. So when you see that sort of action and it’s coupled with a situation where the stock is gapping down on news, like it was today for earnings, you really got to watch these close because these are the ones that you’ll start to see the big magnitude in the move, some big momentum. So what we had on this today is some rather short term ascending support that started back here just at the end of 2018, and then we had some very short term ascending support.

Now all of this is short term, this correlated with a very important point and that was this 50 day moving average, as well as you’re back below all your major moving averages. And from this confluence point right here, down to this trendline, is a very nice move for this stock. It’s about a 5% move. And then you have this relative low pivot at 4420, so a very good potential move on this to fill this window, if you did start to break down. So again, broke in chart, good technical setup for a move back lower. Only issue we had to deal with was the conference call at 10:00 am. Now that you see the daily chart, you understand that the levels that we’re working with and the technicals that had set up for us, and what I was looking for out of the open is what you can see right here.

This blue line right here is your short-term ascending support. This blue line right here, the lower one, is your 50 SMA. So you can see you got kind of caught up in there because it’s a support point, a significant support point, but what I was waiting for is for it to break down below that and then take out the pre-market low, because that would tell me that the weakness was present and this is probably to go lower. And then you can see from there down to here, that’s a big move. You’re basically 46 to 44 and a half. That’s a really good move on a $40 stock, especially on a stock that trades with some very good liquidity. So definitely wanted to keep it on watch. But you see here in the open, just got kind of chopped up between the levels. Again, no interest. As we get closer to the conference call, no interest. Conference call commences and we start to see a little bit of movement here. And this is when I started getting interested in seeing that about 10:30 or so when we started to break down, and that’s where I actually took the trade.

So as we started to break down here and we saw some volume come in, that’s what really flagged this to me, is I saw that kick up in volume. And that’s something that’s really important because when you see volume come into a stock in the same direction as the move, that typically means you’re going to see some momentum take place. So, had it all set up there technically, volume, profile wise. Everything looked good, and we then dialed into our faster time frame. And this is where I ended up getting short.

So we started to come down through here. I saw the volume kick up on the fast time frame, a little bit of a retest below the 50. And we started to pull there, and I wanted to see it get below this, because remember it was basically that pre-market low and that trendline that it needed to get through. That’s where we rejected over here early in the morning. So while I could have taken it here, it wasn’t as predictable as if it got down here that we probably see the continued breakdown.

So once we had this set up take place right here, we got below the trendline, it started to look really good, couple of retest, and then we started to resolve. Lower right here I got short. 4625. At 4625 we got short, was going to add on the brake of the low and again at the pre-market low, which was in a few cents of each other over here. 4615 or so. And then 4612. I was going to add through those two and then start to cover as we broke down through 4645 90s and 80s, but what happened here is started to look really, really good, set up really nicely, the continuation of [inaudible 00:08:17] was going to happen.

Then we got into a little bit of a situation that sometimes happens, and you have to really know how to handle these situations and not panic, because panic is the worst thing that you can possibly do when you’re caught in a situation that is a tough one. It puts you in the red. And if you panic, almost certain that you’ll come out with worst case scenario.

So you got to sit tight. We had this kind of whipsaw move against us, and the only reason I sat with this, I didn’t stop out, was for two reasons. One, we had this trendline that came in through here and we had the VWAP. And we know that we stopped at that point right here. We know that we got stopped there. So I’m thinking, “Okay, well, we got stopped here this time. This is kind of a quick move up after it’s broken down. The stock’s definitely weak. Well, let’s see if we can reject this, if we can pull off this. Rather than sit here and consolidate and then push again, I’ll stay in.” But if we did push back above this and start to move, I would’ve gotten out. Now what happened was we test, test, test and all of a sudden you had this big crack back down. Big crack back down. And that’s a hard pull off of the level and rejection.

So once I saw that happen, I added, as we took out 4620, added more to my position. Added again as we started to come down through the pre-market low, which was 4610. And then what I wanted to do is as we took out 46, I was going to cover into the 90s and the 80s, and then let the rest ride, see if we can get that moved down to 44. And what happened was really nice breakthrough 46. I covered a third at 4595, and then consolidated again sideways, sideways, sideways. Broke lower, covered more, 4585s. And then we started to look really good here. I was going to take more off. I was actually going to be out of the whole position at 4550, or just above 4550 was where my bid was to be out of the trade.

So I only had a third left at this point. I was trying to wait to see if we could get one more breakdown and see if that would take us down to that level, and that would be the end of the trade. But I consulted there for a second, and what I noticed that we had this happen right here, we had this higher low that we put in. When you notice that you’re not continuing to make lower lows on a short sided trade, or you’re not making higher lows on a long sided trade, you need to be on high alert. The fact that we had a higher low put in, and we also had this pivot right here at 4580, whichever one hits first is what I’ll do. So for example, if we turn back over and take out that higher low pivot we put in, I’ll stay in the trade.

If we stick that higher low pivot and we reclaim that last pivot, this last relative pivot here, I’m out. So that’s what happened. We got above it and I got out 4585s, and called it a day at that point. So not a huge trade. Didn’t get the continuation down to where we wanted to around and through 4420s, 4450s, but we’re able to pull the wind out of it just over 2000 bucks. And hey, that’s a really solid win in my book, especially for a day that was almost a no trade day. I sat here a little bit longer because of all these conference calls than I normally do. But we were able to not lock in a nice one on that and I’ll definitely take it.

So good job you guys who were able to catch that one. Definitely was not the easiest trade to get started. I almost stopped out. I would have expected that a lot of people stop out on this. But again, having those technicals very precise and understanding what type of levels they are is so important, because that’s what kept me in this trade. If I didn’t have that trendline there, I most likely would’ve been out of this as we popped back up through 4640s. But the fact that we had this big, big trendline here coupled with the 50, we knew that was like a big resistance zone. We couldn’t push higher initially into this pivot. I stayed with it and it worked.

But definitely important to know your levels and understand the importance behind them and how significant they are. Is it just a daily high or low, or is it actually like a major macro trendline that it’s been respected. So it’s really important to understand that stuff, and definitely know what you’re trading against.

But anyway, that’s trade for today guys. We’ll be back at it first thing tomorrow morning.

Hey everyone. Thanks for watching the videos. I’ll continue to make sure that all of the watchlist, 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.