Warrior Trading Blog

No Trade Tuesday! | Mike’s Trade Recap

Mike_8.20

Heads up guys, I am back in front of the screens this week after being away from the screens for almost two weeks. Taking some time-off here during the slow August month of trading but I wanna take a few minutes and do a recap on today’s action, talk a little-bit about yesterday’s good trade and just the market in general so let’s take a few minutes and break down the action in the market.

All right, good afternoon guys so no trades for me today but I wanted to talk about a little-bit of the action that we had and what kept me out of the trades. You know we’re in the middle of August here, typically the slowest month of the year for trading. The volumes are very light – and we typically don’t see a ton of continuation in the form of momentum, so you gotta be kinda careful on what you’re trading and definitely be quicker on those trades all together.

So, first off lets talk about the market here. We talked about this both yesterday and this morning but we had the twenty moving average here that we tested, we back tested, and we held throughout yesterday’s morning session-and we started to run back up but then we ran into this trendline that is a very significant macro line and we were unable to get through it and we closed back just below that line into yesterday afternoon but into this morning came and re-tested again and we were failing it and that was definitely of concern to me because this line that we have here is a long term macro trendline and this is a very significant line.

Why?, because this is the, it originates at the bottom of the December blowout which took place basically in December of last year, 2018 and then we come up to this last relative pivot and if we extend that line out it comes right out into this, these pivots here today. Now, I know this is quite crowded in through here but it’s because there’s a lot of significant levels and this trendline falls right on a very significant level here at this 293.20 level. So, that’s where this trendline originates again, it’s a long term ascending support macro trendline that originates back in December of ’18 that has two very significant points to it. Right, this is the next biggest pull back that we’ve had and you connect those to use those as your anchor points, you typically will get a very significant, well respected line.

So that’s how we have that line, you can see how we were testing it throughout yesterday’s session and then this morning we were talking about that if we were unable to push through this level now that is correlates with that pivot at 293.20, that trendline is at the same spot so it’s a confluence point. If we were unable to push through that and we were feeling a big level of resistance and we came back to break the 20 we would likely see a swift move to the downside because the support is a lot lighter than the resistance that we have and when that happens we typically see the move in that direction be pretty strong and that’s what we had for the first twenty minutes of the day into today’s session.

Now, while the move was pretty vertical it did come right down, the volume’s were extremely light. Volumes across all sectors were really light, even in the retail sector which has a lot of names reporting this week is trading at about half it’s normal relative volume and that’s something that is definitely concerning in that, it just tells you that the market’s lacking volume. When the markets lack volume we’re going to see lack of momentum, lack of consistency and it just makes it all together that much more difficult to trade.

So that said, I am always more conscious in this month. I did take a little bit of time off here over the last two weeks just because I know that August is a slowest month and you typically can’t expect that much out of it so it’s good time to take some time away from the screens and sort of re-charge but I want to talk a little bit about what we have on watch today and why I actually didn’t take a trade.

So, we’ll start with this KSS since this is the one that was the most likely to be able to get a trade out of. It’s just that the levels didn’t really line up for me. We didn’t really have enough room to start to get a trade and what I mean by that is that you had this pivot support at 47.40. Okay, right below that at about 46.50 you had an ascending support line. Okay, so if you look at the day it’s a very short term line but it did hold up right, very short term ascending support. So, looking at that coming into the open, I don’t want to short end of that level. Right, we don’t short support which we don’t want to short this is 47.40 pivot and then we don’t want to short the trendline that would come into play so you have to wait until that breaks. Alright, so what happened is we’ve come down to that line.

Now, it did break here but if you look at what happened at this time of day with the market we had the market go completely against us so it’s not inline with the trade. So, we’re breaking down through the trendline here at around 10:05, look at the spy. The spy had already made it’s move and was sitting on support and was actually coming up off of support at 10:05.

Alright, so I can’t take a trade, I can’t take a trade at least to expect to have a low risk and highly predictable trade. I can’t take a trade that’s against the market, especially since we’ve had a cell. So, the market is bouncing off support and starting to get bought up right?, around 10:05-10:10 and if you look at KSS you have already made an okay move down to the trendline but I can’t go short into a trade that is completely against the market. It’s totally against the strategy. You’re typically not going to see much follow through with momentum when you do that, so that’s what kept me out of that trade. Alright, kept me out of that trade and then we started to get into 10:30-10:45 and I know that during the summertime if I don’t make a trade by 10 o’clock or even 10:30, I’m definitely done because if you haven’t seen anything by then it’s very unlikely you’ll see anything with momentum thereafter. So, that’s what kept me out of that, again kind of made the move through, right through the support then it started to look like it was going to move again but then the market wasn’t in our favor. So, I didn’t trade that one.

Again, if it doesn’t have a high predictability factor, I’m not going to touch it because that means I won’t be able to get a low risk trade that I can take with some size to get a good win. Alright, so that was KSS. The next one we had on watch was TJX.

This was just a choppy mess. It didn’t actually ever trigger. We were waiting for it to get below 49 cause that’s where the big pocket opened up. So if you look on the daily here, you’ll see that we had a big pocket that if you got below 49 you were going to sell right to the next major macro trendline which brings you down to around 46.50. Alright, major macro trendline starts from back here in late 2017, brings you back to this relative pivot and then extend that line over. it gives you very nice ascending support line and again if that 49 triggered I would have been short this down to 46.40 but again it didn’t trigger. So it doesn’t trigger, we’re not taking the trade.

Alright, so no trade on TJX.

We had SRPT on watch. Below 95. Alright, below 95 was where we wanted to short this cause we opened up into a big pocket. Alright, below 95. If you look at the daily on this you can see that it did break a nice trendline but that’s where it gaped to. This was kind of this level in through here that we were looking to break, down through 95 cause that was the last relative low pivot, alright and then it opened up into this pivot right here which falls around 84.

Now, the reason this is a pivot?, couple things. We did have a double top into that level and then once you did break through the pivot look at the volume that came in. Look at this huge volume day that came in as we pushed through that pivot. So what that volume is telling you is that it’s validating the level. Alright, it’s validating the level that was formally a heavy form of resistance. So that means that this is a very well defined pivot and then look what happens after. It comes right back and uses that same level as support on the pull back. So that further validates the level and that’s going to be the next logical level of support.

So knowing that, we know that we have a pocket from this 95 level down to 84. So, what I was looking for this morning is if 95 triggered, right down through this point here, I wanted to be sure to catch the move into the pocket. Well, the trade never triggered so if it doesn’t trigger I don’t take the trade. So no trade there on that one.

The next one we had on watch was HD, Home Depot. Now, this was a situation where you didn’t have the market in line, it was completely against the trade. We have the market that’s completely against the trade in a significant fashion then I definitely don’t even consider taking the trade. So, if you look at HD here, straight up in the first five minutes, look at the spy. Straight down in the first five minutes, and thereafter. You can’t expect a trade to work in your favor if it’s not in alignment with the market and some do, some trades will work but you don’t wanna get a habit of doing that because a lot of them, a lot less work on a consistent basis than how many fail.

So, make sure your trade is in alignment with the market and also the fact that this Home Depot had a lot of resistance at this 218 level. Looking at the daily, had this kind of double top that came into play here. It’s not really at a point that I like to trade breakouts, it had to be above that level. So, the fact that you had that heavy resistance up there, coupled with the market completely against you, no trade. Alright, no trade on that.

So, you can see that we had few names on the watch list today. A few decent setups if they actually played out but either the market not cooperating, not being in alignment with the trade or the levels not coming into play at the right time or not coming into play at all, kept me out of the trades.

So, no trades today but that’s okay. That’s definitely normal and happens quite a bit in the summertime.

Yesterday, I’ll just talk about that trade for a little bit. PCG, this was just a simple vwap crack. Once the initial relief move to the upside failed, I got short on this as we cracked down through the back of the vwap. Basically, as the move back up failed I saw it come back below $11, I got short at $10.80 and simply just followed it in and covered down through the lows and I was out of the trade.

So, decent trade on that. Definitely got what we wanted out of it. I was looking for a little bit more continuation to take out the pre market low but it didn’t get to that point and I had my last cover at just above $10. Around $10.10. So, decent trade there if you look at the fast time on it, I’ll show you kind of what I was looking at there for my entry, but I like these trades that fail, that have a gap down and they fail the initial relief move higher because that tells you that it’s really weak and that it’s most likely going to continue lower.

So, what we had here is this kind of initial pop up. We pulled right back in and then as we got this pivot out in below the vwap right, this is where I got short. Alright, so this is the crack below vwap here, you had a little side step, stutter and then as it started to reject that vwap I got short $10.80 and kind of just followed the trade in as we got down towards $10.

So, definitely a good trade there. I know it’s not a big move dollar wise but it’s a big move percentage wise and if you’re trading percentages on a dollar amount it starts at add up really quick. So, total we got on this about an 8% move which is huge. That’s a huge, huge move relatively speaking. Typically, I’m only looking for about 2% so we got a lot bigger of a move in this stock than we usually will get on a relative basis but it only takes one. Alright, you just need one stock to move in your favor with a high predictability factor and PCG had it, so I decided to try a trade in this and see if we could get a nice move to close out the day.

So, anyway that’s a recap for today guys. Just wanted to talk a little bit about the market and why I didn’t take a trade today and why it’s important to really wait for your levels to trigger. Wait for the market alignment, otherwise you’ll be caught up in the chop and that’s just tough trading and it’s completely avoidable. That’s the whole point behind it is that all that stuff being caught in the chop is completely avoidable.

Alright, so everyone have a great evening and we’ll be back at it first thing tomorrow morning.

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