Warrior Trading Blog

Breakout or Bailout! | Mike’s Trade Recap

Mike_4.30

Hey, what’s up guys? Well, a red day today just by a little bit though, only by about 30 bucks. I took one trade to get started this morning to try to get a momentum move to the upside, just didn’t end up working and I got out as quickly as I could, as close to break even as I could. That’s what’s really important.

Trading is momentum, strategy is understanding when something’s not working, just get out. You really have to time these trades. So you’re getting in as they’re moving and if it doesn’t go, get out. So breakout or bail out mentality. All right, so let’s take a few minutes and break down today’s trade. Also, I want to remind you guys that we are running our 40% off flash sale, our biggest of the year. Use code refund 40 at checkout to receive 40% off site wide.

All right, good morning guys. I want to do a quick recap of this morning’s trade. It is slightly red day. We closed out at GE trade here on an attempt to long side, down 23 bucks, 24 bucks. We stopped out as close as we could to break even. Caught a little bit of slippage, had a little bit of size on this, but we saw something here that looked pretty interesting and we wanted to give it a stab. So I want to break this down a little bit and talk a little bit about what I saw and I took this trade. Again, break even, that’s fine. Keep those losses real small. Basically, if it doesn’t go when you’re in, get out, right? It needs to go virtually immediately once you’re in. Otherwise, just need to get out of the way.

So this is what happened with GE today. We had a earnings gap on this and it actually was coming into a very interesting level here, which was this descending resistance line. So this blue line right here. Now, we also had the 200-day moving average at the same spot, which was important as well. But this trendline was going to be much more important because they’re major pivots in the market that it’s obviously been rejecting and you can see again, it rejected here this morning. But what we are looking for as a move above and a hold above that line for a continued move through this pocket here, back up to this recent pivot, which was around 11.30. So what I wanted to see was at least a hold, that 200-day moving average and start to move through this descending resistance. If we started to pick up volume through that, I wanted to try to the long side to see if we could get, again, a move through this pocket.

GE, this is definitely a stock that’s much lower in price than we normally trade. However, this is a stock that can put in a very decent move and you can take a lot of size on this and it’s a very, very, very safe trader. So that’s why I like to trade it in. When it doesn’t work, it’s very, very minimal damage as you can see. So that’s what’s good about this stock. Again, I typically just stay away from this price range, but GE itself, it actually trades really well and it respects technicals pretty well and it allows us to take a heavy position and we really don’t have to look for that big of a move to make a lot of money. So that’s why I will trade GE when it is in play and today we had a move that appeared like it was going to work but it just didn’t end up moving. So we ended up stopping out.

So what I want to talk about here first is obviously the gap higher. This is that trendline you see that comes off the daily, right? This is that major descending resistance line. You can see we rejected it here or we sold back through it this morning. But then what happened on the open was very interesting. What that was was you had an initial test of the 200-day and it held to the penny, okay? Now, in addition to that, you also had 12 million shares of volume go off as it held that. Now, that’s pretty important. If you had that type of volume and that 200-day is holding, that’s something you want to pay attention to and I was looking just to buy the dip on it. So once it popped up off that level and we closed back above this descending resistance trendline, this is telling me that the weakness is being bought and we held that 200-day moving average on 12 million shares of volume in the first five minutes.

That’s massive, right? Were we were trading over five times relative volume, really important situation there. Then we closed back above the trendline, so that, I liked even more. So then what I saw on the fast time frame was a very clear pivot that was put in and that’s where I attempted the trade. Okay, so here’s the open, come right in the 200-day test on a ton of volume, make a higher low right here and we start to push through, this is a trendline. This is the descending resistance from the daily. So what happened was is once we pushed through it, we came back down to retest it. All right, this is really important. What you want to see, it held and started to resolve higher. This is where I got long, 10.46. All right, 10.46, started to push back higher here and I wanted to see it hold over 10.50. I was going to add to it at that point, but we reject the 10.50. We pulled back.

I was still in the trade. We held a higher low, which you could see right here. All right, a little bit of a higher low and we started to go up again. We made a higher high, started to look really good. But it didn’t put it in a pivot over 10.50 so I didn’t add to it at that point. I wanted to see it hold and in order for me to have confirmation that’s holding, I need to see a pivot we put in or a retest and hold, right? Never did that. It just tested the level. Then once it started the test that level and pull off again, I saw what was essentially a triple top here. We couldn’t really bust through this level. So as we started to roll back here towards break even, I just marketed out of position and said, “You know what, it’s not making that momentum move and we’ve had all these other pieces to the puzzle come together, but this one not holding.”

So if that’s the case, I need to get out. It basically made three attempts. It couldn’t do it. That was enough for me to see that it didn’t have the strength and momentum to make the move. So remember, you need to get out if it’s not moving right away. So that’s essentially what I did. I gave it three chances, it didn’t work. So on this third attempt when it failed, I got out as it came back to my break even. Got a few shares off, obviously another penny below or so. But that’s okay. It was worth the attempt. All I needed to see on this thing was a whole above 10.50. I would have added to my position very heavily and then a move up to 10.70, 10.75 would have been a really, really nice day, right? A really nice day. That would’ve been basically two to 3% move on a two to $300,000 position, which is essentially a couple thousand bucks. Very easy to capture on this when the set up is happening.

Now this, I would trade this any other day, right? I would trade this again any other day. It really had a perfect pivot put in back above the support level and started to move. That’s exactly what you want to see and that’s why I tried it and we had room to continue to run. So again, this is just a trade that didn’t work. We followed all the rules. It was just one of those ones that the market was kind of lackluster today and that probably had an effect on it. You look at the spy, you’ll see that … You see that was kind of just fading here. We rejected the all time highs and that obviously didn’t help the trade, but I was looking more so on the fact that we held that huge 200-day moving average on a ton of volume.

We put in a higher low pivot back above the major trend line here that you can see was being respected and we started to pivot higher. You really can’t ask for anything more for confirmation and that’s something that I acted on and most of the time, a lot more than it doesn’t, it works. This is just a situation today where it didn’t. But really important part of this is that you get out if it doesn’t go and you can always reenter and that’s what I did. Keep them really small and then when those trades do hit, that’s where we get the big winners. So just wanted to cover what happened today. Again, just this is a situation where the trade didn’t end up working out, but that’s okay. We had everything we needed to enter the trade and as long as you follow the plan, we know that the system works.

So that was a trade today. There were some other things that we had on watch. PRGO had a really great technical setup here. Just didn’t have any volume out of the open. The only 200K in the first five minutes, that’s less than half of what I’m looking for out of the open. Really great technical setup, breaking down really nicely. Room to move. Just didn’t have the volume to take a trade. CGNX, CGNX was another one we wanted to keep on watch here because again, we were breaking down. Recent [inaudible 00:09:03] support back the major moving averages. But again, we popped at the open, didn’t end up breaking down through the pre-market lows so that one was out of play.

NXPI had a really good look to it for potential long. But we saw this move out of the open happen, this big kind of reversal move and that’s never a move you want to see or a candle you want to see, right? Because that’s telling you there’s a lot of selling happening up there. So once that happened, we took that off our list. So it ended up being a morning where we didn’t really have much momentum and that’s typical of mornings where you have a lot that’s showing up on the gap scans. We have a lot of names that are showing up and there’s a lot to choose from. What typically happens is traders’ attention gets, it gets spread too thin. There’s not one to focus on. So this is the action that we have as opposed to when you have just one or two in play and everyone’s looking at the same thing, you have much better action to trade.

So that was this morning. No trades yesterday. Just this GE trade today. So starting off a little bit slower on the week here, after ending a really phenomenal week last week. I had some really great trades. Still plenty of time to hit the goal for the week. But we’re just going to sit tight and take it slow until something really presents itself and then we’ll become aggressive again. The action is just a little bit slower right now with the spy sitting at these all time highs trying to figure out whether or not it’s going to move or not, and there’s a lot of people on the sidelines waiting to see that as well. So any event, guys, that’s the recap for today. We’ll look back here first thing tomorrow morning, see if we get some better action.

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