Warrior Trading Blog

Getting chopped up this week! Small Cap Recap!


Getting chopped up this week! Small Cap Recap!

All right, what’s up everyone? Let’s see, so we’re going to do our midday market recap here, go over trades from this morning, answer any questions that you guys have. Again, people watching this later on Facebook or YouTube, you guys can post questions in the comments and I’ll come back through and answer them later.

Okay so, this morning off … I mean, this morning was I had a good start with my first trade being green. But it wasn’t the cleanest … We didn’t see the cleanest action today, and it kind of started pre-market with the fact that I didn’t have anything I really liked in my pre-market watch list, or pre-market analysis. I was pretty much saying, “You know, I see three or four, maybe five stocks are interesting. But I really don’t know if any of them are going to work out very well.”

So the leading gapper was T-E-U-M, gapping up 31%. And this is one that … Oops, let me scroll back up. We’ve traded in the past, and so I thought it would probably be good for a scalp, but I didn’t think it would be good for like a really big move. It just felt like it would be crowded. So as soon as the bell rang, and when I say, “Crowded,” I mean I felt like there would be short sellers that would be targeting it because of the fact that the last few times it’s gapped up, it’s sold off either the next day or that same day.

So as the bell rang and it opened, we had a pre-market high of 34, and we opened at 120. We dropped down for a second, just at 120, and then we started to pop up. And as we started to pop up, I jumped in this at 128, 129. And I was looking for a move up to the pre-market high of 34.

We got the move and I started selling at the pre-market high. So let me open up my Light Speed account here. Hang on, I got to log out of this computer and log in on that one. Okay, do, do, do. Okay, so T-E-U-M, that was a decent trade, 347 bucks, in at 28, out at 34, in at 28 and 29, out at 33, 34, 34. Tried to sell at 37, no fill. 35, no fill. Sold the rest at 32. So decent trade there. But that was the only one on my watch list that I was really watching. And then we see on the High Day Momo Scanner M-Y-O-S popping up. And at first I thought, “Well, I’m not sure I trust it because we’ve got the 200 moving average right here at 201.” Excuse me. But as it broker over the 200, that’s when I started to think, “Okay well, this is showing some strength.”

So I jumped into this at, let’s see, 9:55 AM. So that was like right here on this little pull back. Kind of had a little micro pull back there, and so I was like, “I can jump in this, look for the move up higher.” We popped up, I got filled at 09 and 10, which was a little on the high side. We hit 212. I was thinking 215, 220, and just continuing to ride the momentum. And then, of course, you can see it dropped here back down. So I had to stop out of that. Stopped out pretty quickly at two bucks. Lost 900 on it. So 10 thousand shares, risking 900 to make … Risking a thousand to make two thousand. So stopped out of that and it put me down $600 on the day.

So I was like, “All right, well it’s a little disappointing. Look for the next opportunity.” And the next trade, the last trade was on M-Y-O-S. I got in for the first five minute candle to make a new high, which was right here. I got filled at 98 and two dollars. Popped up to 207, I put an order at 208. Didn’t get filled. Drops back down and I stopped out at 190. So I lost another 900 bucks on it. So just kind of took two stabs and neither of them worked out. On the second set up, I was looking for this to break through high of day over 212 and go to 215, 220. Which again, would have been a great trade, but it just didn’t happen. So a little disappointing on that.

What was kind of interesting was this morning, we saw a bunch of stocks on the Momo Scanner. Just sort of these like surprise hits on the scanner. Even the first one, S-N-A-K, which I wasn’t super interested in because I felt like it would … I felt like a food stock is just not really like a hot sector. Hot sectors to me are like … I mean, they’re usually like tech, or biotech, or something like that. Because the valuations on those companies, they can run at such high multiples, and this Adventure Foods Inc, I don’t know. I just wasn’t sure about it. So I wasn’t super interested pre-market. The bell rings, it drops down. And so I was glad that I didn’t take a trade, and then it squeezes up like 40 cents, and then it drops all the way back down, and then back up. And so it was just sort of choppy.

So it was on the scanner, but I didn’t really see clear opportunities. And then, of course, we have M-Y-O-S hitting here at 180. I would have done better if I just jumped in at 180. C-E-T-X, another one hitting the scanner, another low foot stock. Spiking up on some volume, but you can see this one didn’t do too much. Hit the scanners at 32, high of day was 32. So definitely wouldn’t have wanted to buy that there. MEET, M-E-E-T, hit the scanner at 403. High of day on this was 403. So kind of seeing this pattern of these stocks hitting the scanner when they’re kind of extended. E-M-M-S hit the scanner at 289. This one is high as 305, but it was very light on volume. It didn’t feel very safe. B-E-X-V. This one was bouncing up after kind of a strange daily candle where it was low yesterday, and then kind of bouncing up a little bit. Didn’t feel very comfortable with that one so I just let it be.

C-Y-C-C. This one hit the scanners. I was looking for an opportunity to get in it, but I just wasn’t able to find one. And look at this. It squeezed from 190 up to 215, and then back to 85. So that’s fine. I mean, we see that kind of thing a lot. And that by itself isn’t the biggest concern. It was just feeling like I couldn’t get an entry. You can see here, a little bit of a pull back at two dollars, a little bit of a pull back right here as well around 190. Those were kind of the best opportunities to get in for a quick scalp. But I didn’t take those and it never gave us a clean five minute set up, which was disappointing.

A-K-T-X, this one I was watching, but I just … I could never get an entry on it because as soon as the bell rang, it squeezed up from 590 to 650, and it had like 20 cents spreads. I mean, right now the spreads are only eight cents, but the spreads were pretty big. You can see on the one minute chart how it was skipping candles here. It went from 650 to 675 just in one candle. Like just because the spreads were so big. So really just didn’t get anything on that. Watched it for the first five minute set up. Five minute set up didn’t form, it dropped back down. So broke through the 200 and it’s now come back down, which is disappointing. It’s been strong over the last couple days, but just on relatively light volume. Today, when I looked at it, right in this area, it was up 33% on 200 thousand shares. So the volume was super light.

M-Y-O-S, again these ones hitting the scanner. L-B-I-X, this is a cheap one. Broke through one dollar. I didn’t want to jump on it. Sometimes we see these kind of squeeze up. Up to 150. Didn’t see it here on this one, and I didn’t think it would either. I just didn’t feel it. So left that one alone. And then all the sudden we had this L-M-F-A. And I pull up the scanner … Or I pull up the chart on it, and I was like, “What just happened?” This thing on like 50 thousand shares of volume went from a dollar fifty to 298.

It just squeezed up 100% on like 62 thousand shares, which is so strange. I don’t know what was going on with this one. But I certainly, when I popped it up on the chart, would not have felt comfortable buying it at three bucks. So I was like, “Okay, we’ve got to wait for a pull back that looks good.” It formed a pull back, but it just was sort of choppy. The volume was dying down. The spreads were getting bigger, and I just didn’t … I don’t know. There was no opportunity on this one.

So basically, today was one of those days where there just wasn’t a lot of love in the small cap market. And you know we’ve seen, this is kind of something I’ve been dealing with for most of the month. I mean, it’s really something that’s been going on for even longer than that, but it makes it really tricky. And it’s part of why I’ve been building out my swing trading strategies, because sitting here day after day, looking for good bull flags and stuff like that, and then getting stopped out because of the chop is disappointing. I’ve talked to traders who are long bias who are struggling. I’ve talked to traders who are short bias who are struggling. So I don’t know that it’s just a long bias issue. I think that the small cap market has just been a little bit slow recently.

So having said that, we’ve seen some really good opportunities on some of these higher priced stocks. N-L-N-K from 10 bucks to 18 bucks. CURA, obviously this one did pretty well from 9 to 13. And then we’ve seen some of these higher priced stocks that have given us good opportunities as well, as long as you didn’t mind the amount of capital that you’re going to put into it. E-F-X is the one I was trying to pull up, Equifax. This one has pretty big range today with a high of 116 and a low of 111. So that’s … It’s certainly a big range, but I look at this and I’m like, “Okay, a thousand shares of this is a hundred thousand bucks.” So I’m starting to think it just feels very risky for me to try to get aggressive.

If I want to really get some size on it, I’m going to be putting a lot of money into that trade and I just get nervous on that. So even though I have the buying power and the margin to do it, I have a little bit of a hard time putting a hundred grand into a trade with the reward potential being maybe I make a thousand dollars, which a thousand dollars is good. That’s good money. But it’s only one percent. It’s a lot of money tied up. God forbid something happens. That could be something that really sets me back a ways. So in contrast with a stock like M-Y-O-S, I’m in it with 10 thousand shares, I’m in it with 18 thousand dollars. And I’m not saying that 18 thousand isn’t a decent amount of money, it is. But worse case scenario, it drops 50%, I’m down nine grand.

Something like that. Best case scenario, it goes up, and I make two thousand dollars, which was my profit target, and I’m up like a solid 10%, maybe 20%. So it’s just … You know, it’s one of those things. It depends on your account size. When you’ve got a bigger account, you know that you need to move away from the small caps anyways, because you can’t take a hundred thousand shares of a small cap. So if you’ve got a half a million dollar account, well yeah, it makes sense to leverage it and be a little more aggressive. And when we’re day traders, the likelihood of getting caught in something where the stock drops 50%, or 75% intra day is pretty rare. It’s pretty slim. I don’t know. I mean, we’ve seen it happen a few times.

And like, this D-G-L-T stock is halted right now, but this is a low price stock. To see it happen on high priced stocks is pretty uncommon. So I would feel certainly more comfortable holding a thousand shares of Apple. I mean, I’m holding a thousand shares of an actual like legit company that’s very well established. That’s very different from holding 10 thousand shares of a small cap. So I get it. Like I think if you find the strategy that consistently give you that five hundred to a thousand dollars a day, and yes, it’s on large caps, and yes you have to use your margin, that’s okay. But then if you want to scale it up to four our five thousand dollars a day, how much buying power would you be using?

If you, to really make good money on trades on Apple, would you need to take like three or four thousand shares? And then you’ve got 600 grand in the trade. Like, obviously four thousand shares of a stock like Apple today, like you could have made some good money. You could have made four grand. But percentages are still kind of small. So I’m not criticizing it because I think that if you’re good at trading those higher priced stocks, then you can do really well and you can scale it to a multi-million dollar portfolio. It’s just something that I’ve had a little bit of trouble getting my head around. Because I get nervous about taking that amount of risk.

So it’s all relative, but in the mean time, for me, I’m trying to focus a little bit on finding better or good quality swing trade set ups. And that seems to be my kind of preferred way of dealing with this slowness in the small cap market. Some of the other traders in the room, I know you guys have been moving more towards the higher priced stocks, and that’s okay too. Especially if you see good opportunities. I think John’s four or five trades today were on higher priced stocks, and he hit his daily goal. Or, I don’t know, 500 bucks or whatever. He had a decent day. So it’s not to say that you can’t scalp your way to the daily goal with higher priced stocks, it’s just something that I don’t seem to be quite as good at.

So one of the things we were talking about last night, after the Warrior Pro session I was talking with a couple students, and we were talking about the importance of building out more strategies that we can all trade. Because I’ve been day trading for a really long time, and I’ve been focused pretty exclusively on day trading. I’ve never really gotten super into swing trading. I’ve never gotten super in … And I’ve focused on day trading small caps for the last several years. So it’s not a bad idea to have other strategies you’re always developing on the side, because then when you get into a lull, like we’re in right now in the small cap market, you’ve got something to fall back on.

And I feel like I haven’t developed that as much as maybe I should have. And when you make 60 or 70 thousand dollars in one month, you don’t feel a lot of incentive to mess around with like a hundred shares to try to develop a new strategy, because you’re like, “I’m doing really well.” But when things get slow, then you start to think, “Hmm, it would have been nice if I’d been working on that.” So I encourage you guys to work on developing those secondary strategies just as kind of diversification. And that way, if you go through a period where things change a little bit, you’ve got something to fall back on. This was true with reversal trades.

When back in 2015, 2014, 2015, reversals were incredible. We were seeing the best reversal trades off the reversal scanner. The same exact scanners pretty much that we’re running today. You’d see the stock hit the scanner down here at whatever, 45. Two hours later it would be back up at $47. I mean, we were seeing amazing reversals. And then we kind of saw a little bit of a change where we just … I mean we see them occasionally that are really good, but they stopped being as good. And I was trading a lot of reversals, and then I started realizing I kept getting stopped out. I kept shorting strong stocks, I kept going higher. I kept buying these weak stocks, and they kept going lower. And I just started to get frustrated and so I stopped trading that strategy and got more focused on momentum.

And the last two years has been really good for momentum, but the last three or four months, momentum on small caps has been a little bit more difficult. I still am in awe at how incredible the first quarter of this year was for me. I mean, it was really the best three months of trading I’ve ever had. And I’m … I mean it’s crazy, because it couldn’t have come at a better time. Starting the $583 account challenge to be just in really strong markets where trades were working out really well where we were seeing stocks going up 50 to 100% like every single day. And so I did just a great job in those six, eight weeks, taking 500 bucks and turning it into 105 thousand dollars.

And then, since then we’ve noticed a little bit of a taper off. One of the things I mentioned last week was last year, for 2016, my profits were low in the spring, got higher, higher, higher. Peaked during June, July, and August. And then, faded coming into December. This year, out of last year, I picked up and just killed it in January. 50 thousand I think in January. 70 thousand in February. Maybe 30 thousand in March, and then it’s been kind of trickling down since there. So these are the ebbs and flows. And sometimes they’re longer, sometimes they’re shorter, sometimes they’re taller, whatever. But it can wear on your patience a little bit when you sit down, day after day, looking for your A quality set ups and you’re not seeing them.

So there’s the value of having more than one A quality go to set up. When you have just one, you sometimes just have to sit tight and wait. And you might go through a period of a couple weeks or whatever where even A quality set ups aren’t working super well. So anyways, that’s kind of my two cents from today. I’m hoping that we have some decent opportunities Thursday and Friday. And I’m really just hoping that this month can kind of turn around and I can finish the last two weeks of the month in the green and with some solid trades to kind of recover this month. 2016, I didn’t have a single red month. It was a great year. 220 thousand dollars.

This year, I’ve had one red month so far, and I’m red on the month of September as of right now. So it’s a little bit of a … Definitely a little bit of a different year. It’s just funny how these things go. In a lot of ways, this year has been a lot better because I started with $583 and made a lot of money. I’m up to, let’s see, 160 thousand total between my two accounts, and I’m at 100 right now, 127 on the account that started with $583 dollars. So down on the month of September. But in that respect, from percentage gains and stuff, it’s been a much better year. But I think at this point, let’s see. I’m at 160 total right now. As of August of last year, I was at 143. By the end of September, I was at 162. So as of right now, I’m about tied with where I was at last year. 160 versus 162.

And if I’m anything above 162 by the end of September, then I’ll actually be ahead of last year. So it just means I need to finish the last quarter with 50, 60 thousand dollars, which is what i did last year. 11 thousand in October, 25 thousand in November, 22 thousand in December. So we’ll see. If we get some good momentum, things pick back up, in one month I can make 70 thousand dollars. I’ve already proven I can do it. But if things are slow and I keep stepping up to the plate and missing, then we’ll just have to keep trying to keep tight stops and keep those losses small until things start to turn around.

Anyways, that’s about it for me today, and I’ll be back first thing tomorrow morning. All right, I’ll see you guys in the morning. Again, anyone with questions watching YouTube or on Facebook, feel free to leave them in the comments below. 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 any time I go live or upload new videos. Until then, happy surfing.