Warrior Trading Blog

Red Day Part II: The Revenge of The False Breakout

false breakout

What’s up everyone? All right, so today, second red day in a row. This seems to happen to me. I’ll have a really nice hot streak, five, 10, 15 green days in a row, and then I kind of come up against a wall and I’ll have a couple of back to back red days. Sometimes it’s two days, sometimes it three days. So today’s the second red day in a row, down 3,800 bucks.

 

This morning I was really mindful of saying, “Ross, you’ve got to take it easy today because yes, I lost money yesterday, but we also saw a lot of false breakouts.” Part of the reason I lost money is because I just didn’t get filled on a really good set up. So yesterday could have been a $4,000 winner for me, but it wouldn’t have changed the fact that we still saw a lot of false breakouts, and the one stock that I traded didn’t end up holding up at all.

So today I was mindful to that and I said, “You got to take it easy.” But I saw a trade pre-market that I thought looked really good. This is what’s challenging. An A quality setup in a choppy market automatically is a B quality setup. Because remember, we are always trading in the context of what’s happening in the overall market. I lost sight of that a little bit today. I continued to be a little aggressive on that first trade and right out of the gates, it was slammed back down.

It was a gap and go setup. I jumped in, it popped up and boom, came right back down and I had to take the loss. So took a $6,000 loss on that and then spent the rest of the morning kind of slowly digging myself out of the hole finishing down 3,800. So I cut the loss down a little bit which is good and maybe I’ll be able to take a little bit more out tomorrow but I’m still finishing red. So anyways, we’re going to break it all down in today’s midday market recap.

All right, everyone. So finishing the morning here in the red down $3,817 bucks. But overall, still green on the week and very green on the month, up about 6,000 on the week, 70,000 on the month. So having a couple days here of chop is to be expected. It’s really just about minimizing the losses and trying to keep those pullbacks as small as possible. So yesterday I was down 1,500. This morning, I knew I was going to have to be a little bit careful but the stock I was watching pre-market was DXR. I really thought this one looked pretty good. I mean, it was strong from a move from 8 up to 10.50, up 30%, nice gap, headlines. A little pullback here, excuse me, pre-market with a high of 75.

So my setup on this type of trade is I usually prefer to get a little bit of a pullback. I like to see these drop down and then I get in as they pop back up. That didn’t really happen. We opened at 10.40. We dipped to 10.39 and as we started to curl up, I jumped for the break over at the half dollar at 10.50. So I got into this here. Let’s bring this up here, with 7,500 shares but I got kind of a bad fill. I was using my hotkeys and so I ended up getting filled at 58, 63 and 69. It pops up to 70, it was like 80 and then it started to drop. So I tried to sell half. I only filled 1,100 shares. I tried to sell more on the ask. Trying to kind of scale out. I really wasn’t able and in this candle, it dropped down to $10.

So at that point I was like, “Okay well, obviously that’s a quick drop. I’m going to give this a second to see if it will do a red to green move.” So sometimes what they do is they pop up. They pull back for a couple of candles and then they surge right back up through the open. So I was like, “I’m going to ride this out. I’m going to give it a second.” So that was right here and then it dropped down to 9.75. I didn’t like that. It popped up to 10.20 and then right here I finally said, “No, I got to bail out,” and so I sold at 10.70 right here and 10.75. So that’s a $6,000 loss. I mean, that’s a big loss. It’s disappointing. I was trading a little bit of a higher priced stock, over $10 is always a little bit riskier.

But just as easily, this thing could have gone to 15 bucks. So I think the thing that I knew I had to be careful today because yesterday we saw a lot of false breakouts and so I was thinking, “All right, I should be careful,” but pre-market, I really thought this looked great. I mean, this looked to me like a really good quality setup. I just ended up getting stopped out and it didn’t work. So I guess I would just chalk that up to the 25, 30% of the time that I’m not right. My accuracy is between 70 and 75% right now. Sometimes, everything looks good. You take the trade and it just doesn’t work. It’s not really any fault of your own. It’s just the way the strategy is. There’s no strategy that’s right 100% of the time.

So today is the day where I took a little bit of a loss and that’s fine. For me, the losses are bigger just simply because I trade with larger size, larger dollar amounts. That’s why I’m up $70,000 on the month right now. That’s why I’m up $219,000 already this year and it’s only April. So when you trade with big size, your winners are big but your losers are big. It’s one of those things, if you can’t handle the losses, you shouldn’t be trading with that type of size. I can handle these losses. It’s not a big deal. I’m not upset today at all because I’ve had a great week, a great month and I know that I’ll get it back and that trading with this type of size, if that had worked would have been seven, eight, $10,000 winner.

It’s just what comes with the territory. So you got to be able to kind of compartmentalize that, put it away and not stress on it. Again, as long as you know that you have metrics that are sustainable. You’ve got a good profit loss ratio and all that stuff then you can have faith in your system, faith in your strategy and don’t get stressed. So again, my trade review stats here, this is … I’ve been importing trades here since 2016. So obviously a lot of trades in here, $850,000, 2,000 trades but over all of those trades, my accuracy is 71%, right? So that’s what kind of gives me the faith that, sure, there’s going to be red days. Largest loss is $12,000 loss, biggest winner, 31,000. There’s going to be some extremes, some big winners, some big losers and then there’s just a lot of stuff in between. That’s just kind of part of the deal.

So today’s a little bit of a red day but it was just one trade. One trade that got me down. Then I took a couple others that helped me get back a little bit out of the hole. So next trade was OPGM. Now, this one I was a little skeptical of as well. Here’s the problems, when the bell rings and the two stocks you’re watching both kind of tank, it’s not good. So that’s what happened on OPGM. It popped up and then it rolled over hard. It started to curl back up and I got in it right here at the half dollar. Ended up popping all the way to a high of 79. I was in right here at 2.50 and right through this area of kind of a little bit of congestion. It was just sort of like choppy right there.

I started scaling out because I felt like I maybe had too much risk on the table. It just wasn’t going to work. Then of course it ends up popping on this one candle all the way up to 2.80 so luck of the draw there. I sold most of it in this area first. But made some money on that. Ended up getting back in for the first five-minute candle to make a new high which was right here. It popped up only 2.71 and then rolled over. So I made 1,200 or 1,300 and then I gave back about 600. So no big deal there. One winner, one loser. Still green on the name.

Next one, SINO, S-I-N-O. This one, kind of a surprise. Just all of a sudden hits the scanners. It squeezes up from about $1.15 to $1.30. I jumped in at $1.29. It pops up to $1.40. It pulls back then squeezes up to $1.44. I sold through this area here about $1.40. Just didn’t really hold up super well. 10,000 shares. Then adding another 5,000 so 15,000 but only $1,100 of profits. That’s just the reality of trading these cheaper stocks. They don’t have the same range. So a little bit of a winner there.

Then last trade of the day was VTVT. Out of nowhere, it spikes up about, I don’t know, 20% or 30%. Goes from $2 all the way up to 2.40 and I jumped in as it was squeezing at 2.35. Pops up to 2.43 then hits 2.46 then I’m selling at 2.40. Didn’t really hold up that well. So only made $279 on that. But what’s nice is that I was able to recoup about $2,200 today on decent trades. So yeah, I had that one haircut right out of the gates, five, $6,000 loss. It is what it is. I was able to keep on trading and recouped some of the losses but really, this wasn’t a good day of trading. It wasn’t easy.

We were seeing a lot of chop and so we’re going to be a little careful tomorrow as well. I don’t want to have three red days in a row, right? We’re going to have to really be mindful that maybe we’re seeing a little bit of the tide turning. We had an amazing first two and a half weeks of April. If we need to scale back a little bit, trade with smaller positions and reduce risks until things open up again, that’s just fine. I’d rather make $70,000 or whatever it is, $80,000 in three weeks and then have four days that I don’t trade at all, right? That’s better than having four days where you lose 15 grand. So as of right now, I’m down 3,800 today plus 1,500 from yesterday so I’m down like five grand in the last two days. So I want to try and minimize how much I’m going to let that get away from me.

So tomorrow, part of me would say don’t even bother trading because it’s Friday but I will come in and there’s certainly a possibility that we’ll see some momentum. Last week, you guys FTFT which gave you that kind of surprise momentum squeeze and that’s what sometimes happens on Fridays. So right now, basically what we need to see that was from $2 all the way up to 3.60. So if we get one of those tomorrow, boom, that could be a five, $10,000 winner just with one trade which should be awesome. So the thing is when you start to see the tide turning, you start seeing more false breakouts, more stocks that pop up and they come back down and you have to be a little careful.

So what we want to see are stocks that pop up and then they pull back and then they go for the second leg up. So continuation is what we want to see. Yes, we can scalp the pops. But if we’re seeing them getting slammed back down faster and faster and harder and harder, that’s going to start to get a little bit frustrating and we don’t want to get our accounts chopped up. So you can see here, this is what we would call a very strong rejection. It pops up and then all the way back down. That’s actually a bearish engulfing candle which I’ll take a screenshot for the classes because that’s a decent example of it. So it’s one right out of the gates. You have a candle that’s more red and the previous one was green. So I’ll just grab a screenshot there.

So that’s obviously a rejection. CHCI, someone called that one out in the room. This one, kind of a rejection here as well. Didn’t have a lot of volume. VTVT, didn’t hold up at all. Rejection. DXR, obviously hard rejection. This is a ugly gap. I mean, it gapped up and it fill. It’s filling the gap all the way back down. That doesn’t look really good for momentum. So it may take us a couple of days to kind of clean the slate and reset, refresh and then what will end up happening is a stock, whether it’s tomorrow or Monday or Tuesday will pop up and early short sellers who have been making money on these are going to short it and then next thing you know, it’s going to keep going higher.

They’re going to cover it and more traders are going to go in and boom, you got a stock that’s going to go from $2 to $6. That gets the momentum going again. So these are the cycles, the ebb and the flow. After those false breakouts yesterday and again today, we’re definitely going to have to be a little careful here for the next couple of days. What I’m going to do is I’m going to reduce my share size down to … I’m going to put it at 10,000 shares for right now, just for Friday, just try to finish up the week with a couple of scalps. If I make 500 bucks, that would be great. I just don’t want to push it too hard. So maybe I’ll actually set it at … Well, I’ll leave it at this for right now. We’ll see. Obviously we’ll see how things look tomorrow. But remember, tomorrow is in the context of what has the week been like. Has it been a strong week or a little bit choppy and what we know is that the week was good but the last couple of days have been choppy.

So even if you do see what looks like an A quality setup like DXR, you can’t lose sight on the fact that it’s still in the context of what was the market like today or the last couple of days. So anyways, that’s it for me. I hope you guys have a great afternoon. We’ll be back at it first thing tomorrow morning, 9, 9:15 for pre-market analysis. All right. See you guys in the morning. If you’re still watching, you must have really enjoyed that video. So why not subscribe and get email alerts anytime I upload new content. Remember, when you subscribe, you become a member of the warrior trading family.