Warrior Trading Blog

Opening a new Swing Trade & Scalping the Momo on $SPEX

new swing trade

Opening a new Swing Trade & Scalping the Momo on $SPEX

What’s up everyone? All right. So, we’re gonna do our midday market recap here in one second. I’ll give you guys a chance to get logged in, or at least live streaming here. Sometimes when I do a live stream, I notice that if I back out of Facebook and then I come back in, it shows I’m live streaming but no one’s connected. All right, I see some of you guys getting connected here. All right, cool. So we’ll do the midday market recap, but first I just want to remind you guys that at 1 p.m. Eastern today, so in like an hour and 20 minutes or so, we’re gonna be hosting a live webinar. During this webinar I’m gonna talk about the three myths to trading penny stocks that most traders won’t tell you.

Now, these are … you’re gonna be able to learn from these myths and understand why I was able to take $583 and turn it into over $100k in 44 days earlier this year, trading predominantly penny stocks. Now, part of this webinar is going to be redefining what a penny stock is and teaching you the different tiers of penny stocks. We’ve obviously got a good amount of range. There’s people who trade the sub zero, trip zero penny stocks, and I want you to understand where, within the spectrum of trading penny stocks, you’ve got really high risk, and where you’ve got a little bit less risk. That way you can focus your strategy on the area that is most suitable for the type of gains that you’re trying to produce.

Okay. So that’s at 1 p.m. Eastern today, but in the meantime, let’s do our midday market recap. Okay, so let’s see. Let me get logged into my Lightspeed account and we’ll do this recap. So, going over the trades from today, we’ve got total three trades today. One new swing trade — at least what right now is looking like it’ll be a swing trade — and two day trades. The two day trades I took, both on SPEX, S-P-E-X. This one is … man it’s a frustrating one, and I wasn’t sure I wanted to trade it this morning. You know, it starting to curl up, it looks good, right now we’re under $2. My first trade on it was right out of the gates, pretty much, on a 1-minute pull back.

So we had this 1-minute pull back right through here, and I got in at $1.80 expecting we would break over $1.84, target was $2. We popped up to a high of $1 … let’s see, $1.83, and then we dropped down to $1.67. I had 5,000 shares so I really had no choice but to stop out. So, let’s see, go back up here. The first trade there long, 5,000 shares at $1.80 and half a penny, stopped out at 70 and 73. Or sorry, stopped out at 70. I got back in at 73 and tried to sell at 79; I didn’t get filled. Stopped out at 75. So, in total on SPEX, I lost $388, which is a little bit annoying. And I’m holding MEET right now, $3.52 average, 4,000 shares. This is gonna be a swing trade unless I get stopped out. Stop is, right now, at break even.

So, let’s see … the second trade on SPEX was getting back in. Where was it? It was right around … let’s see, the high there was 80, so yeah, I got back in right around 9:48. It pops up to a high of 80, so you know, I’m up 6, 7 cents, whatever, on 5,000 shares. I wanted to see it break over high of day. I wanted at that point to see it go up to 84, 85, 90, and then hit $2, and it just wasn’t able to hit that level, so I got stopped out there. So, two small losses on … or one small loss and one small winner on SPEX.

Now, right out of the gates I took this trade on MEET. This was on my watch list because it was a stock that has dropped more than 20% in the last 20 days. So looking for stocks that have sold off a lot in the last 20 days, and then trying to scoop them up off the low with a stop right at the bottom. So, yesterday’s low is $3.43, so when I first got in that was my stop, and my entry was at 52. Now, I have a scanner right now where I’m looking for the stocks that have dropped more than 20% in the last 20 days. So I just sort that scanner by the stocks that have dropped the most. So let’s see, right now the stocks that have dropped the most are actually, let’s see … we’ve also got on the scanner CVGI, down 26%, we’ve got … that one’s not too exciting. We’ve got BW down 77%, that one’s more significant. We’ve got BBOX, down 56%. So you know, we look at these and I’m thinking, “Okay, well some of these I may not be able to trade at all.” They may just be too weak, whatever.

WIN was one of the ones I took off the scanner. We got a little bit of a bounce, but it didn’t really hold up. TEVA was another one we were watching but I didn’t trade. ZYNE is one that I did trade, and made some money on. A couple good bounces right here and again right here. So that’s the scanner looking for stocks that have dropped down, and then really, any of them that start to pop up. The first day that it makes a new high is the point that we’re watching. So then, as soon as the bell rings, I can just glance over at that scanner and I can say, “Okay, well which one of those stocks is green? Which one of them is starting to move up today?” Because they’re all candidates, so which one is moving? Boom, MEET’s popping up, I jumped right in. And I didn’t hesitate, I just looked at it, looked at the daily, and I was like, “Yep, looks good. First day to make a new high.” Yesterday’s high was 52, I got in at 52. So, anticipating that this is a first candle to make a new high since August … well, I mean, it’s actually the first candle to make a new high since August 1st. So it’s a pretty significant day.

So I got in initially as a day trade that might turn into a swing trade if it holds up well. Now, obviously, if I get in at 52 and it immediately drops to 42 and I get stopped out, then whatever. I’m done with the trade, I’m stopped out; max loss. And that might happen in the first 15 minutes after taking a trade. I don’t know if it’s gonna hold up. But obviously it’s continued higher, it’s looking good. And so on this one I was like, okay. Out of all the stocks on my scanner, I take it because it has a good daily setup, and it could just be good day trade. I mean, I’m up $600 on it right now, so I could sell it and that’s a pretty good day trade. But, this also has a little bit more potential.

So then I start digging a little deeper and I start to think, “Okay, well what do I like about this stock? And why did this stock recently just drop like 40%?” And so, I look at the catalyst and I see that they reported earnings on the 4th. And I look at the earnings and I’m reading them, and I’m like, “You know, this to me doesn’t look that bad.” I think the big concern maybe is that the gap net income was $.9 million, or one penny per diluted share, compared to a net income of $29 million, or 55 cents per diluted share, in the second quarter of 2016. So I think that’s the thing that’s a little bit not good, but the total revenue is $31 million, up 91% over a year over year, which to me, seems good.

I looked at the balance sheet, and the reason I look at the balance sheet is because I want to see how much debt they’re carrying. Is this company carrying a lot of debt? Because if it is, then I might start to think that we might have like a secondary offering. And it doesn’t mean that we couldn’t, but that’s what I kind of think. If they’ve got a lot of debt, and they don’t have a good cashflow, then we’ve got risk of a secondary offering. So I look at the debt and it shows the total liabilities right now at $14 million, and the total assets are $209 million. So I’m like, “Okay, that looks, to me on the surface, decent.” And I’m not an expert on this stuff, but just on the surface that looks good to me. So I look at the cashflow. Do they have good cashflow? Is it positive? And trailing 12 months free cashflow is $31 million. So I look at that and I’m like, “Okay, this all seems very good on the surface.” So okay, well why is the stock down so much? Right? Why did it drop so much?

And in this particular case, it’s hard for me to really understand the reason why it’s priced this low, which makes me feel better about buying it off the bottom. In contrast with stocks like ZYNE and TEVA, you know, pharmaceutical stocks that are a little bit more subject to things not going well, bad clinical trials, stuff like that. That sector can make me a little bit more nervous. So I feel fine on MEET, I think it looks decent for a swing trade and a move back up. I mean, right now I’ve got a good average and I’ll just sit tight with it. You know, I might at some point start to scale out. Let’s see, 85, $3.85, would be 10%, so that might be a spot to watch, but right now we’ve got room to the upside. So I’m just gonna let it do its thing, but I’ll put my stop at break even so I don’t risk losing money on it. I don’t want to take a loss. And maybe this afternoon I’ll end up taking some profit on it, but for right now I’m just gonna let it do its thing and not really … not try to over manage it.

And that’s really hard for me, because if I watch this tick by tick, I’m gonna start telling myself, “Oh, I should do this. I should do that.” But I’m taking it based on the daily setup, and I think this has a good amount of potential. So I just need to take my hands off the wheel for a little bit, let it do its thing, put it on cruise control, and look for other setups. Now, I’d love to find other setups, but I just don’t see anything right now that looks good. So I’ll hold this for the time being. Oh, GEMP, that was the other swing trade that I had last week that I sold intraday; I didn’t end up holding it overnight. But you know, it was still a winner, $600 or whatever it was. Right now, this month, I’ve only taken three swing trades. WIN was a loser, $70 down, GEMP was a winner, up $600, and I’ve got MEET right now.

So I’m really trying to focus on good quality setups where I can minimize my risk. What I would like, certainly, to find, would be more momentum setup, because that’s more inline with my day trading strategy. So, SPEX, this isn’t a swing trade here, but when we see a stock that recently made a big move up like this, and then start to pull back, we start to think, “Okay, maybe this is flagging and now I can look to buy it for a move back up.” So the two strategies that I’m looking at: one is curling off the low, and two is a pull back after a big move. So what are the two scanners I would use? Number one, the leading gainers in the last 10 days, or 5 days, or 20 days, doesn’t really matter; just the stocks that made the biggest move. And then we sort them and look for little pull backs. That’s number one.

Number two, the stocks that have dropped the most in the last 10 days. And now on those ones we look for the curl back up. Now, if you like to short sell, obviously you could use the long scanner to look for stocks to short. I don’t feel as comfortable doing that, especially swing trading. And similarly, you could look at the stocks that have dropped the most and say, “Well, I want to short it.” But again, I don’t feel as comfortable shorting stocks swing trading, holding them overnight. So, those I’m just going to — short strategies — leave to people who are more interested in that, that’s fine with me for the time being; I’ll focus on the long side. So if I’m gonna trade the long side, I’m gonna be buying off the low or buying pull backs, and those are really the two strategies that I’m looking at.

Okay, so that’s where I’m at today. It’s Thursday. So tomorrow, I don’t really … I don’t know that I would want to hold this into the weekend, but perhaps. I was trying to check out my options chain. I haven’t traded options in Lightspeed, but one of the things that I like with options is the ability to sell a covered call. So now that I’m holding 4,000 shares of MEET, I could potentially sell a call at $4 against this position, to make a little bit more money. If it goes up to $4 and I get taken out of the trade, then I’m gonna sell my shares at $4 to the person who has that call. My shares go away and I book the profit. That would be fine. If it ends up going up to $3.80 and then falling down off that level, then during that time I benefit from time decay, and the calls will come down just a little bit in price and I might be able to make an extra couple hundred bucks on it. So I was looking at these ones.

Now, the thing with MEET is that you don’t have a lot of option activity on it. So the calls were, let’s see, August 18th. I mean, I’m not gonna do that. So, September, one month out, the call at $4 is 15 cents on the ask, 5 cents on the bid. So I’m probably not gonna get filled even if I tried to. If I wanted to sell this at the covered calls at 15, 10 contracts would be $150, that’s 1,000 shares. So $150 times 4, maybe I can make an extra $600 with those, but I’m not totally, totally sure. And right, that’s true that if I have the covered call, I don’t want to stop out of the trade, because then I’m gonna be naked on that call. And if the stock goes back up suddenly … like let’s say it suddenly drops to $3 and I got stopped out, and then it spiked up to $4.50 and is halted pending a buyout at $8, now I’m really screwed. So that does add some complexity there. And in any case for right now, there’s not enough liquidity on these for me to really justify doing it, and it’s only $600. So I’m just gonna leave that alone for now. But on a stock that was a little bit higher priced, that might be a better opportunity.

UBNT is one that I am gonna keep on watch for a couple days for a little bit of a flagging pattern. I’d kind of like to buy it closer to 64, 65, but right now I’m not. It’s just kind of going sideways and the volume is just really light. But this one’s interesting for long side; DVAX is also interesting, kind of flagging here. This one has some stuff going on with a drug trial or something like that, so I was a little bit concerned on that one. What’s another one that I was watching? Let’s see. DVAX, MYOK. Oh, MRNS, this is one that I was watching last week but I didn’t take this trade over $2.40, that’s hindsight being 20/20. But it just was a little light on volume through this area, and it was getting kind of, just creeping higher, and I didn’t feel like I quite knew the apex point. So that one I just stayed away from.

All right. So anyways, that’s basically our recap for today. New trade on MEET that I’ve got my stop on. Well actually, I don’t have a stop as you can see. There’s no active orders. But I have my mental stop on it, so that’s fine. I’m just gonna let that work. I really like the daily. And this might be an opportunity for me to be in the stock at $3.50 and ride this back up towards $4. I mean, look at where it came from. Came from $5, just dropped down. But when I looked at the company, I looked at the financials, in my interpretation I think it looks pretty decent. So I like this, and I’ll sit with it at least today as long as I don’t get stopped out.

Okay, so that’s it for today. Also, reminder, at 1 p.m. Eastern, so in an hour, I’m gonna be hosting a webinar on penny stock trading. So we’re gonna be talking about the three myths of penny stock trading that a lot of traders wouldn’t be apt to tell you about. Now, I talk about penny stock trading because one of the things I’m gonna do is I’m gonna redefine what I consider to be penny stock trading. For me, you could say that I’ve traded penny stocks for the last six months, or eight months. I took $583 and turned it into $100k trading penny stocks. And that’s true. The reality is, I was very rarely trading stocks under 50 cents, or under 10 cents. I didn’t take a single trade under 10 cents. I trade a certain type of penny stock. And so the first part of our penny stock webinar will be me redefining what penny stocks are so you understand that when we talk about a stock that’s priced between $1 and $2, that technically is a penny stock. When we talk about stocks that are listed on the NYSE, and trading with millions and millions of shares of volume, those are technically penny stocks.

Penny stocks are not just the pink sheets. They’re not just the OTC stocks. There are definitely opportunities for us to trade penny stocks priced between $2 and $3, according to the SEC definition. So we’ll be redefining penny stocks and I’ll be sharing with you the strategies that I use to find them. I’ll put the link in here for those of you in the chat room that want to attend this webinar. Penny stock trading webinar. There you go. Okay, so that’s at 1 p.m. Easter, so that’s in about an hour. So I’m gonna grab a little bit of lunch and then come back here for our webinar. Now, game plan tomorrow, trading the first two hours and then I hope all of you get out early. Call it a day at 11:30 and go enjoy the weekend. Okay. So I’m gonna grab some lunch and I’ll be back here at 1 p.m. All right, I’ll see you guys in just a little bit.

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 any time I go live or upload new videos. Until then, happy surfing.