Warrior Trading Blog

No Trade Tuesday! | Mike’s Trade Recap

Tuesday

Hey, what’s up guys? Well, it’s Tuesday, and no trades for me. I really didn’t like the action that I saw this morning. It was a lot of inconsistent sort of chop, a lot of it fueled by the overnight gap, which is an important concept we’re going to talk about today in the recap, but when the market moves like that overnight, has a big move in either the upside or the downside, you got to be really cautious, because what typically happens is the move is in the gap, which means during the day it becomes very choppy, and inconsistent action, and no momentum. If there’s no momentum, there’s no real opportunities for big home run trade.

 

So, what do I do? I sit tight, and that’s one of the most important lessons you will learn as a trader as you start to progress, is learning to know when not to trade. It’ll save you a ton of frustration, not to mention a bunch of money. We’ll talk a little bit more about that in today’s recap, as well as the stocks that we looked at, and why I didn’t trade them, and then I’m packing up and getting outta here. I’m headed up to see the team, and Ross, in the New England office.

All right. What’s up guys? Good afternoon. It’s one of those days where we had no trades. As you can see here, no positions, no orders. It was a day for sitting tight. One of the most important things you’ll learn as you start to progress in your trading career is the importance of knowing when not to trade, and today was definitely one of those days, in that the action just wasn’t that great. Again, the inconsistencies in the momentum, especially with where the market was sitting, was a very concerning point for me, and I wanted it to be sure I didn’t get caught in that whipsaw movement. So, I’m glad I did. There was a few opportunities out there, but wasn’t anything with a lot of momentum, and I need momentum for my strategy to work. Let’s take a look at the market overall.

Talk a little bit about why we sat tight this morning. We talk a lot about this all the time, but we covered it again today in this morning’s breakdown, because it’s a very important aspect or concept to understand, is that when you get a big gap in the market, whether it’s up or down, you got to be extremely careful to trade in the direction of the gap, because what typically happens is the move ends up being in the gap, and then thereafter the price action is relatively choppy, inconsistent, and it makes it very difficult to get continuation or follow-through on really anything. We much rather the market open flat, and then see a trend in one direction or the other, because that will really help stocks see that follow-through in continuation.

Today, we had a few different things going on here, in that we gapped down, but we also were gapped into a major, major support point. 270 on the SPY. This is a very critical support level on the SPY, and being that we don’t chase the gap, and especially we don’t chase and move into support a resistance, that’s a situation that can cost a lot of money. It can cause a lot of damage. So, it’s what I call a completely avoidable situation, and I wanted to avoid that today. I didn’t want to be part of a situation where I’d get caught in a bad trade, when it was very clear, and you know, right in front of us, that this is a level you don’t want to short into, and especially if you already have a gap down. A lot of people try to chase that gap, and they get burned when it turns around. So, big pivot on the 270 point here. You can see we cracked through it today. We’ve reclaimed it though.

This does look like it wants to try to reverse off this level. We put in a big volume bottom over here on October 11th. So, if you look at October 11th, at what happened there, that was the short-term low, and we had a big move here off the bottom, volume bottom, high day volume bar on the five minute against a major support point. So, right against that 270 level, volume bottom gets put in. We’ve been above that level ever since October 11th. We’ve just been kind of grinding higher, but today we came back down, and we retested it. It broke. Now we are reclaiming it, which is a sign of strength here, at least in the in the near term. Can it hold that level is the question, and what type of direction are we going to get after that?

The tape’s all over the place guys. It makes it really, really tricky, right? We’ve seen a big break of the level, and it was selling below it this morning, and that would typically tell us that we’re gonna get some continuation, some accelerated selling to to the downside here, but we’ve since reclaimed it in the afternoon. This makes it tough altogether, because now we’re back above it, and what do we do tomorrow? Do we run back up to this level, into the 200 day, and then fade again? It just makes it really hard to get a direction to get trades to follow-through, and being that we had the gap down, we tested level, we reclaimed it. The action on the stocks this morning just wasn’t there for me, and first of which was CAT. Now, CAT today had a really nice technical setup here coming out of the open, and we had a really nice window all the way down to 112.

I really liked what we had here. It was setting up really nicely at this trigger point. We had a window all the way down to 11180. So, I was looking for this thing to break and hold below the selling to continue. Then I was going to jump in and try to catch this move through the window. You can see it did make a decent move off of this 118 level, which is where we are looking for it to break down, and it made about a two point move. Now, the action during this move was extremely choppy. Nonetheless, it made the move, right? You could have got a nice profit on this. However, there is no way I would’ve traded this with any sort of sizeable position, because of where we were sitting on the SPY. Remember I talked about we gapped into a major support level?

You can’t short into a major level like that and expect the trade to work. So, being that we were sitting on that big level on the SPY, I just couldn’t get into a position that would make sense for me to trade this, to try to capture a big win, even though we had a good technically base set up here on the five minute as well as the daily. And, put that together with the choppy action we’ve seen, it’s just not a home-run type of setup, with the market the way it was. If the market opened flat and was starting to sell off hard, it’s be a much different situation. I would have definitely traded this. So again, being very cautious, being very patient, waiting for the big trade to set up. This could have been it today, but the market wasn’t in alignment for it to happen, so I didn’t trade this.

So, that was CAT. 3M. This one looked even better. Had a really nice trigger point. It started to break in the pre-market here, but then it got bought back up into the open, and just chopped itself out, and it’s just been kind of grinding sideways. If you look at the daily on this, just such a nice window. It’s kind of disappointing that this didn’t resolve. And again, this is the type of action we’re seeing right now, is the lack of resolution on picture perfect setups, right? Picture perfect pivot here. Straight shot down to this pivot here at 180, a quick eight point move on this through this window is what we’re looking for. It started to set up really nicely, as you can see in the pre-market here, right up against the trigger point, sitting really tight, and broke the pre-market. Kills the trade.

We don’t want to see that happen. We want to see it sit up against that level the entire time, until the open, and then we want to see the sell off. We don’t want to see it before, because it kills the trade. All right? So, you know, thereafter it just kind of chopped around. Sold a little bit with the market. Tested in the 270s level, then it got bought back up. It’s back above the trigger, and just kind of grinded back higher. No real momentum. No real follow-through, no real trade. So again, today’s just a day of sitting tight. The action will return. It’s just all about being patient, and then strike when we do have confirmed momentum again, and become very aggressive. Which, it will happen, and hopefully soon.

With all these earnings coming up, there’s sure to be something that we can jump on that will eventually have the momentum. If we have to sit and wait until that happens, then that’s we’ll do. We don’t want to get caught in the situations where we are going to be chopped out, and just dealing with inconsistencies. It makes training very difficult. So, that’ll be it for me today guys. I’ll be back at it first thing tomorrow morning.

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.