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Warrior Trading Blog

Mike’s Market Recap: Quick work for a Monday!

quick work

What’s up guys? Hope everyone had a great weekend. It’s Monday morning, 30 minutes into the day and our job is done. We had a really phenomenal trade on NKTR.

 

It’s set up perfectly for us, out at the open at the 200 day moving average and continued to fade nearly six points of profit for us. Really nice job and I want to take a few minutes and break it down in today’s recap.

Alright guys. Let’s jump into today’s recap here on NKTR. So, a phenomenal trade this morning on a stock that presented us with a fantastic technical setup. We had some momentum to come in and we were really able to get aggressive on this thing and get a really, really nice trade. NKTR gapping down near 30% as we were approaching the open upwards of $90.00 down towards $62.00, so a very significant gap which is extreme. Right?

NKTR Stock Chart

We want to watch the stocks that are moving at the extremes because that’s where we see the volatility come into play. As day traders, that’s what we want. We want volatility, ’cause that’s where movement happens. Alright? Being that this stock gapped down nearly 30% we had the 200 day moving average in range, we had some nice pockets to trade within so we wanted to keep a close eye on this stock out at the open.

If we take a look at the daily chart, first thing that I see right off the bat is this resistant zone here around $70.00. You can see there’s a nice pivot in through $70.00 where the stock pulled back, held that level several times and then moved to the highs. Now, again, it pulled off those highs up near $112.00 all the way back towards $70.00. It held that, started to bounce and just kind of sitting sideways here for the last few weeks but being that we held that pivot twice was important and that we wanted to have that on our charts as a major resistant zone.

Now, just below that you have a level here at 68. Alright? A little bit of a swing low, that pulled back and held before moving to its highs at that point. This resistant zone in through 70 through 68 was very important. We wanted to keep that on our charts in the event that this stock got bought up off that 200 day moving average and surged into that resistant zone, ’cause that could be a potential fade spot. That would be your immediate resistance. Alright? We had that marked off in the event the stock started to surge.

Now, below that we had the 200 day moving average and we had room all the way to this pivot here at 55. Now, 55 is a very significant pivot. There’s a couple reasons behind this. You can see this is the first spot it sort of pulled back after this big run up and it bounced and sat there several times before getting above it. It got above it, made new highs, pulled back, tested that 55 again and that’s where it made another big move. Now, outside of this price action right here, if you scroll back way back in time, back to early 2000, you’ll see that there’s a pivot in through 55 as well.

You know, I get asked this question all the time, “How far do I go back to locate levels of support of resistance?” The answer to that question is as far as you need to. Right? I’ll go back 20 years if need be to find a level of support of resistance because stocks have no perception of time. If the level is there it’s going to respect it. Alright? This is a nice pivot in through 55. You can see several tests in through here before really failing and selling hard. That 55 correlates with this level back in 2000. Alright? Late 2000 we got a level at 55 and that correlates all the way back up until those last couple months here and this pivot of 55, which was the target for today’s trade.

Now, if we got below that 200, is what I was talking about this morning, if we started to break down through that 200 that’s where I’d like to go short. Back to the five minute here. The game plan out at the open on this was because we were too close to the 200 day at the open, I was going to sit tight until we had a confirmed break down of that, and a re-test and that’s where I would get short.

We’ve gapped down too far to try to anticipate a break down because what’ll happen in a lot of these situations, and you’ve got to be very careful if you’re trying to fade these, but a lot of traders will look at this as a dip buying opportunity. As a low risk dip buying opportunity because you’ve gapped down such a significant amount, 30%, and you’re sitting on that 200 day which you’ve respected here in the pre-market and you’re coming back into it again at the open. A lot of traders will try to buy this dip and set their stops relatively tight to see if they can get that to start moving to the upside and it’s got huge potential back towards 70, which is nearly 10 points.

So, you gotta be really careful of that, of anticipating. What I wait to do on these, is just wait for that to confirm and then that’s when I’ll initiate my short position, once I’ve got confirmation of the weakness and the break down through the 200 day. Now, if we dial into a fast timeframe here, the 15 second, which is what I use for my entries, if we go back to the open, you’ll see that this initially tries to pop, alright?

We’ve sat tight on the open, we want to see if there was any sort of initial pop and what happens on these stocks is that if the initial pop fails or gets sold and does not hold, then these will continue to sell. What happened here on the open is we started to get a little bit of a pop, we were still above that 200 day, we started to get a little bit of a pop and I just wanted to wait. Alright? I wanted to wait and see what would happen with the price action, ’cause I didn’t want to get caught in a situation where I was on the wrong side of the trade on a stock like this, that’s gapped down so far and has the support of the 200 day.

Instead of trying to anticipate, I’ll give up a little bit of a move to get more confirmation. I’m paying to reduce my risk. Right? ‘Cause I’m paying by letting the stock move a little bit, giving up a better entry for more confirmation. What I did is as soon as we got this break down through the 200 day, which was right here, this candle right here, as it broke down, closed below on the 15 second, what I did then is I waited to see some buying come in on the level two in time and sales.

As soon as I saw that it started to get bought up after that quick flash and break down through the 200 day, I started selling. Alright? I started selling short because remember, this stock’s gapped down more than 10%, it has an SSR rule or a short sale restriction, which means you can’t short or market in on the bid. You have to get filled on an uptick.

What I did is as soon as this thing started getting bought up after the flash of the 200, I started shorting it and it was filling me immediately, because I was being filled on the offer, on the uptick. I got filled. My average was around $61.10, $61.00. Then we started to fade. We failed the 200 and we faded and then I covered portions of my position at every point, all the way down to $55.00.

I set my final bid at $55.00 and got out of the way. Now, obviously this thing ran a little bit more and you know, you could have traded it longer, you could have taken another trade against that $55.00 pivot and done extremely well but we got the meat of the move. We looked to be done in the first half hour, and that’s what we were able to accomplish here on NKTR.

Now, again, something to be really cognizant of is when you’re trading these types of plays is that while using the 15 second you want to wait for that confirmation. Alright? Then if it pops back above you can get out and then just re-evaluate. So, your risk is very limited because you’re using a much faster timeframe but you also have to understand that sometimes this causes traders to become a little bit trigger happy and can cause you to get in and out too any times.

You just have to respect the technicals, follow the pivots and let the trade play out. As long as you’re in the driver’s seat, what I do is I continue to draw the pivots. Alright? So, here’s the first pivot, the lower high. We didn’t get another lower high until right here. Alright?

So, now that I’m in and I’m short, I’m not going to stop until we get back above this pivot. Alright? We come back down, pop back up, here’s your next pivot. Next lower high. The next lower high is all the way in somewhere in through here. Alright? I keep drawing these as they get put in, as we go lower and lower. This is what it would look like. I wait for the next lower high and that looks like we have one right here.

That’s what I’ll do is make this the pivot. That’s going to be my stop. I’ll keep moving these down until I eventually get stopped out or my target has been hit. Today my target was hit before I was stopped out, so the trade was over with right around 10 o’clock. Alright? But that’s the best way to pinpoint those stop outpoints ’cause those pivots mean something. They’re significant. You’ve gotta pay attention to them and respect them because this is telling you that the stock is weak. Alright? It’s telling you that the stock is weak and those are the spots that if it breaks back above that, you’ll probably see some strength coming back in.

So, NKTR definitely was a little bit more volatile than the normal stocks we try to trade but the potential was huge on it and we saw that in the pre-market so we tried to focus on this to see if it would give us a set up and it definitely did. It played out very well. It really did exactly as we wanted.

Got back below this 200 and made a huge move down to $55.00 and beyond, which we were able to capture and many of the traders in the room captured that and even more, and they traded it after that and were able to do well thereafter into this next move to the downside near $51.00.

Good job to everyone that was able to trade that. These are the trades that make your month, you know, and put you well ahead. These are the ones we try to look for and really become aggressive because again, they can make a significant change in your trading. Alright? We’ll be back here first thing tomorrow morning and look to do it again.

Oh hey. I didn’t see you there. Well, 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.