Warrior Trading Blog

Big Green Day Today! +$6,378.64

big green day

All right, so let’s see. We’re going to go over the trades from today. This was kind of an interesting day, because the gap scanner this morning, and you guys can go back and watch the pre-market watch list if you want, it really wasn’t that great. The couple that we were watching, we had CLWT on watch. The pre-market high was 3.60 … It was like 3.65. The problem is, this is a five-cent tick stock, so it trades in five-cent increments. This is different from a stock that simply has a big spread. It will only trade in five-cent increments: 3.15 by 3.20, 3.25 by 3.30, etc.

 

So what this effectively has done, if you think about from $3.00 to $4.00, on the typical stock, how many places can you put an order? There’s 100 places, right? Because you could put them at every single penny, and there’s 100 pennies in a dollar. So you’ve got orders spread across this large range, and it’s not uncommon to see these stocks that trade in one-cent increments move very quickly.

So what the five-cent tick pilot program has done is it’s removed 80% of those different price points, and brought them just down to the 20 price points between $1.00 and the next dollar. So, from 3.00, you’ve got 3.05, 3.10, 3.15, 3.20, 3.25, 3.30, right? What happens is all of the orders that would typically be spread over the 100 different price points are now lumped in these little … It’s almost like thinking … Think of ruts on a dirt road. Everything is getting lumped into the ruts.

What that does is it ends up that there are lots of buyers and sellers at each one of those ruts, at each one of those tiers, and the stocks just don’t seem to move as quickly, because it takes a lot more buying to overcome the number of sellers that are grouped in each one of those little ruts, or trenches, or whatever you want to call it. So as a result, I don’t usually trade them, because if I want to get in this right here at 3.20, I could buy at 3.20, and yeah, sure, I’m down $0.15 on the bid, whatever. That’s not the biggest deal. But the reality is it’s going to take a lot of buying for it to even just move up one tier. So one tier would be to move up to 25. Then, for it to move up to 30 is going to take even more buying.

It’s almost like they trade in a very different way. They trade very slowly. They trade more like a stock like [SIRI 00:03:37], which has a one-cent spread. SIRI has a one-cent spread, but there are so many buyers and sellers on both sides that it moves very slowly. That was kind of the idea of the pilot program. It was to reduce volatility, and to make it easier for investors to buy large stakes in these types of companies.

Right now, if you pull up a stock like KBSF, even though this has 100 possible places you could put an order between each dollar, because it’s a traditional one-cent spread, what you find is that the orders become very thin. You might have a couple of orders at 67, and then 62, and then 60, and then 55. On the other side, you might have an order at 89, one at 94, 96, and 6.01. So if you have someone that comes in an buys 10,000 shares, this could very quickly go straight up to 6.10.

That just does not seem to happen with the five-cent tick stocks. They just seem to get stuck in these little trenches and these little grooves. So generally, we don’t really want to trade them, because they haven’t been good for day trades, the same as we wouldn’t trade SIRI, or Bank of America. We don’t day trade these ones for the same reason: they move, typically, pretty slowly.Now, Bank of America’s a little bit more expensive now, so it has a bit more range, but SIRI is definitely a slow one. Sprint. This is another one that moves really very slowly. It’s so thickly traded.

As day traders, we look for volatility, and we just haven’t seemed to find it in stocks that are participating in the five-cent tick pilot program. That is certainly part of the goal of the five-cent tick pilot program. It was to reduce volatility. But it was actually primarily … The reason it was created wasn’t actually to reduce volatility. That is sort of one of the other possible … Well, they were wondering if it would help reduce volatility, and make those stocks easier to trade.

But the real reason that it came around was because of concern that there were fewer IPOs of small caps in the last ten years since decimalization occurred. Before decimalization, all stocks traded in fractions. In Congress, and blah, blah, blah, there was concern that since decimalization occurred, there had been fewer IPOs of small cap stocks. That means companies that potentially could come into the market are getting that opportunity. They wanted to encourage institutional investors to be able to make money on small cap stocks to the point where they would want to encourage more IPOs, and they thought maybe this five-cent tick pilot program would help that. That would be good for American businesses, and things like that.

I think that the result so far, from the few things I’ve read, is that this has not increased institutional trading in these stocks. Yes, the institutional market makers do make more money with a five-cent spread, but it hasn’t been enough to make any impact where we’re seeing more IPOs, or anything like that. So ultimately, the five-cent tick pilot program, based on what we’ve seen, and what I’ve read, is probably not going to get approved for actual implementation across the whole market. Who knows. Maybe it will. But it doesn’t look like it will.

So anyways, right now, when I see a stock that’s five-cent tick pilot program, like CLWT, I pretty much just don’t trade it. I know that it’s going to be more difficult to trade. However, this was one that did make a decent move here, from $3.00 up to a high of $3.95. I was impressed. It pulled back here a little bit. It broke down. Then it curled, and broke over $4.00. To me, I felt like this was going to be a false breakout, and it was going to probably roll over, so I said that I was watching it short below $4.00, stop would’ve been high of day.

That actually would’ve been a really great trade, and I didn’t take it, which was kind of silly. I should’ve taken a stab at it. As I was looking at it, I just wasn’t sure. I wasn’t sure it was going to work out very well. Anyways, I didn’t take any long trades on that, and I didn’t take anything short on it, but there was that one opportunity there.

Okay, so the one that I traded this morning was UAVS, which was kind of interesting, because this is not a stock that we were familiar with, however it was on the gap scanner this morning, gapping up with a pre-market high of 7.50, as you can see right here. I said, “Okay, guys, this is interesting, because you can see here that it’s a reverse split.” You can see that right on the eSignal chart. This is a reverse split.

We know that stocks that have just had reverse splits sometimes make really big moves. We’ve seen it on KBSF. We saw it a few weeks ago on, I think, INNT, and TENX, and a few others. It’s kind of a setup in a way. The recent reverse split, and then the squeeze. A lot of times, recent reverse splits will also have some news out that sort of get traders excited. I was watching this pretty closely over 7.50. However, when the bell rang, it opened a little on the low side. It opened, actually, at 6.96. I thought, “Well, I’m not really sure this is going to do a lot. I’m interested, but I can’t really tell.”

So let’s see. Let me show you my account here. This is my Lightspeed account, $4,091. Sorry, $4,941. Then I’ve got my IRA account right here, $1,437.  All right, so combined, $6,378 on the day, which is pretty good. On this trade, I thought UAVS, being the recent reverse split, had some good potential, so I decided that I would take it in my IRA. I was a little cautious, but I thought, “You know what? I think this thing will probably work.”

So I jumped in this in my main account with an order at 7.53, right here. Now, in fact, I only filled 1,714 shares, so I didn’t get my entire order filled. I only got a partial fill. That’s the same thing that happened in my main account. I put out an order to buy 2,500 shares at 7.41. Well, I think the order was 7.50, and executed at 7.41, but I only filled 1,000 shares. I then doubled at 7.97, $0.50 higher, which is risky, but at that point, I could tell that the stock was moving quickly. I then added more at 8.50, and I sold at 9.00, and then I ended up adding more at 8.85. So I was adding on this pretty aggressively as high as 8.85, and selling into the squeeze at 9.35.

So let’s look at this. Right out of the gates, it breaks the pre-market high, which is kind of … I was watching it, and I started to see volume coming in at 25, and 7.18, 7.19, 7.20, 7.25, and so I was like, “Okay, I’m seeing buying coming in. I think it’s probably going to break the pre-market high, so I’m going to jump in now.” It breaks the pre-market high, and then boom, that’s where it just really started to take off. It squeezes up here to a high of 9.77.

Again, this is one of those stocks that just squeezed almost three points right out of the gates. The challenge is where do you find a good entry? Fortunately, this had a decent pre-market chart, where we were able to establish entry at the break of pre-market highs. So 7.50 was the entry point, the first entry, and then adding as it squeezed up.

Let’s see. We’ll go back here. On my IRA, it’s saying that I … Let’s see. I sold right here at … I guess I sold 400 shares at 7.61, or 7.71, 7.60. I don’t even remember pressing the button. I don’t know. Either I pressed it by accident, or I’m not sure what happened. But I ended up selling the whole position at 8.35 and 8.25. Definitely a little bit more conservative in that account, taking profit a little bit faster. So with 1,700 shares, the win was $1,400, which is … I don’t know. What is that? $0.70 per share, or something like that? A pretty decent trade, I guess. Yeah. Averages something like that, $0.70, $0.80 per share.

All right, so the reason I wanted to take this in the IRA is because I know that the recent reverse split stocks can move quickly, and sometimes do give us the home run. I had both of them lined up, my main account and my IRA, and just the look of it, the way it was already starting a little bit pre-market, it just to me looked like that KBSF setup, or that INNT setup, so it was just a matter of seeing the volume.

Then, I also thought, “Well, look. I’m only taking 2,000 shares, so if it goes the wrong way, I’ll stop out with a $400 loss. Maybe I’ll lose $0.20. I mean, maybe I could lose a little bit more than that, but I’ll probably keep the loss pretty tight. I’ll just get in. If it breaks over 7.50, I think this could very quickly retest the highs up here, which is 12.50.” That’s what I was looking at on the daily, that we had room up to 10.95, and then 12.50. And it was on the gap scanner, so it wasn’t an arbitrary stock that no one was seeing. It was right on the scans.

That kind of made me feel a little bit more confident about it. Again, yeah, there was a little bit more risk on this, but mitigated by smaller size. I can’t take 10,000 shares at this price anyways, right now, but I was trading a little bit more conservatively just because of the price and the size.

So with my main account, I’m basically adding into the squeeze, because I’m thinking we’ve had stocks like this … CHFS. Remember that one? CHFS, where I got into a stock, it was like $7.00, and it squeezed all the way up to $14, $15 through circuit breaker halts. That ended up being a $33,000 winner. I mean, it was massive. It was the biggest win last year, and it was on this recent type of reverse split setup.

So that’s kind of where I think I was like, “The potential is that this could be a home run. The downside risk, maybe $0.50 at most.”  Dived back down to $7.00, the low of this candle. But with the volume that was coming in, the buyers that I saw, it made me think that it was going to open up a little bit.

So anyways, it starts to squeeze up a little bit. I jump in. I add at 7.97. I add again at 8.50. I started to sell … But again, see, even at 8.50, it was a partial fill, only 600 shares. I was having a hard time getting filled for whatever reason. It was just moving so quickly. I then sold some at $9.00. It dips down for a second, and then I thought, “Well, you know what? I’m going to add over 9.00.” I add, but I only fill 100 shares. So actually, almost every single one of my orders, except for this one, were partial fills. Then, I was able to sell full position, or the full size of that order, at 9.34, and then selling more at 9.10, 8.99, and then stopping out the rest at 8.25.

So as you can see, this didn’t hold up very well because right here on this one minute micro pullback, it failed. This is the same thing that we saw with CWLT. You have to be aware of these one minute micro pullbacks that fail.

Let’s see. Let’s look at CLWT. The stock is consolidating, consolidating, and then that’s the moment of truth. We don’t want to see it break below the low of that previous candle. What we usually like to see is a little bit of consolidation in this type of range, from … What is this, 8.50? Between 8.50 and the high here of 9.47. Consolidation, consolidation. Then, I would be adding over 9.50 for the first one minute pullback, and the move back up. That’s what I was looking for. I had my order for 1,500 shares ready to go, ready to add at 9.50. I thought then it would break, hit 9.77, $10.00, $10.50, up towards $10.95 on the daily chart. So that was the moment of truth, and when that failed, I stopped out, and it dropped quickly, which is exactly what happened with CLWT.

So if you learn to anticipate those moves, you can get out sooner. I sold at 8.25. Pretty much as soon as it broke that level of 8.50, I sold, and had $0.25 of slippage. Whatever. Not that big of a deal. It dropped down to 7.14. So I’m glad that I stopped out as quickly as I did.

For a beginner trader, I mean, we talk about these in the class all the time. We show tons of examples of false breakouts, because you have to be prepared for them. They will happen, and you want to make sure you’re the first one to the door, not the last one to the door. That means you know if this breaks below 3.90, that’s not good. That’s the spot to get out of the way.

So, both of these stocks were kind of interesting today. CLWT, I missed a couple of opportunities on it, both long and short. Being five-cent tick, I wasn’t super confident on it. Did well on UAVS on the recent reverse split setup. Green is good. $6,378.64. So let’s see. That puts me up right now, I guess around $5,500 on the week, because I had that red day on Monday. I was down $3,100 on Monday. Yesterday, I made back $2,300. So green on the week, but still red, also, because Friday I lost $11,000. Including the $11,000 on Friday, I’m still down about $5,500 from my all time highs on the year.

Having said that, I’m sitting right now at, let’s see, about $42,000 of profit on the month, which is not bad. $42,000 for the month of March is good. We’ve got one day left. That’s tomorrow. We’ll finish up the month. Have the day off on Friday. We’ll start April hopefully feeling good, and continuing to carry this momentum.

All right, so that’s about it for me. I hope you guys have a great afternoon. I’m going to head over and sit down with our inner circle students. We’re going to have our mentor sessions this afternoon, and we’ll be … Yeah. Doing our thing.

Anyways, I hope you guys have a great afternoon, and I’ll see you first thing tomorrow morning. All right. See you guys in the morning.

Oh, hey. I didn’t see you there. I was just working on the dream board for my next home run trade. Hopefully it comes soon. Until then, make sure you subscribe to get email alerts anytime I go live or upload new videos. Until then, happy surfing.