Warrior Trading Blog

So Close! +$3K on $LB | Mike’s Trade Recap

Mike_8.22

What’s up guys? So I am ending the day in the green here today by about 3K, but by not nearly as much as I should have. I was up nearly three times that before the trade started to go against me but that’s part of the strategy, I recognize that. I am always trying to look for the home run trades and that requires adding back into a position as the move is continuing, rather than taking all your profits and it will work more often than it won’t but today was one of those days where it just didn’t play out. I gave back a little bit and had to settle for a little bit less, although it still was a very solid day. I’m happy and it’s another day in the green after all. So let’s take a few minutes and I’m going to show you guys some important technical moments in this morning’s trade.

All right, good afternoon guys. Time to recap out today’s action. While I’m up and have a green day here of just over $3,000, then there’s no question that that’s a good day, it’s a good day of trading. However, I gave back quite a bit. I was up almost $10,000 and I was really trying to swing for a really big trade on this and if it did work, it would have been a pretty incredible day but that’s part of the strategy. I recognize that when I am swinging for the fences that sometimes you’re not going to connect and when you don’t, you’re probably going to give back a little bit of what you locked in and that’s what happened today.

Now, seven, eight years ago, I would be extremely ecstatic with … even five years ago, be extremely ecstatic with a $3,000 day but as time goes on, you just try to challenge yourself more and that’s where I’m at now and I really am striving to swing for the fences on these trades and get the biggest possible gains we can with the lowest amount of risk. Again, while it’s a very solid day, I just didn’t get what I was looking for on this but again, that’s part of the strategy and I recognize that and we’re going to talk through and break it down as to what happened and how it actually played out.

So anyway, let’s go ahead and jump in and talk about this trade here on LB. Now this one, I was really focused on this one for a couple of reasons and one of the main reasons is that I have a very good history with this stock and it respects technicals exceptionally well. Knowing that and knowing that I have good trade history on it, always move a stock like that to the top of my list because I know how it trades, I know what to expect. Again, if it’s a good technical trader, respects its technicals, since that’s my strong point, I’m going to focus on a stock that respects it’s technicals. So what we had here on this LB was an earnings reports, pretty weak. The daily chart is just really broken. We were breaking down below the last relative low pivot, which was here in 19.45.

Now to some of you, or to a lot of you, this probably looks like it’s all time lows, but you do have to go back in time to really see if it is or if it’s not, because that definitely will make a difference. As you can see here in LB, it’s definitely not all time lows, but it is breaking the last relative low pivot which falls here at 19.45 which is good for a continuation to the short side along with just a very, very weak daily chart overall, helps the cause for this thing to continue lower.

Now one thing you’ll notice on this trade here today is these descending trend lines. Now I typically will not pay too much attention to a trend line like this, descending support, or descending resistance that then turns into descending support like you can see this was here. So this line here was formerly descending resistance on the stock, but then it turned in descending resistance. I’m sorry, descending support. So former descending resistance now turned into dissenting support. Look how it reacted here just the other day, it sold into this line and that’s the first point it caught support on the way down.

So knowing that, I looked back to see if I could find any other forms of descending support and what I noticed here was from a big gap down and on a volume day, volume day on a gap down, that’s a significant technical point. I use that as my first anchor point. Got my next anchor point right in through here, extended that out and I wanted to watch that line because of the historical price action this stock has had around descending resistance, or descending support.

So we had those two lines on our chart plus this a relative low pivot and then we had a pivot way down here at 15.30 that came from way back in time, as you can see right in through here, way back in 2009. Wasn’t really too concerned with that because it’s quite a bit, a ways away, but in the event it did start to sell, I wanted to know where the next major support point was. So that said, we’re dealing with this last relative low pivot at 19.45 and we have these two descending support lines that were coming into play. So I wanted to watch them very closely just because of the way the stock has reacted to those types of support and resistance lines before. That’s always important.

Look at a historical action, look at the type of move that happened off the line and that will help you gauge what type … or what type of significance a line has and then further on to sort of gauge what type of move can you expect off the line. All right, so that’s what it looks like from a macro standpoint. If we zoom in, we’ll see it on a micro standpoint or a five minute chart and you can see here this morning as we are coming in to the open, we started to pull off that 19.45 line, broke the first trend line and in through here, I was getting a little bit concerned that it had started to make the move. It had began to move through the pocket that I was looking to trade. However, I was still very interested in this because I know that this stock can still put in a big move and continue to trade on momentum, even though it’s a relatively lower priced stock.

So what I did on this, or my thought was coming into the open was, okay, well I’m still okay with trading this because this is breaking a very significant technical point here, this 19.45. It’s got room to move and if it breaks the second line, it really can open up again. Especially if the market was weak, it could really help this thing accelerate lower. So my thought process was, okay, well we’re coming to the open. I’ll just wait for the first pop because typically what happens on these types of moves is that you’ll get a early relief move for people trying to buy the stock or buy the dip and if that move fails, or when it fails, that’s the point in time where you want to start getting short.

So even though stocks are extended like this, instead of jumping in as the move is happening, I will wait for the first relief move to take place and as soon as I start to see that fail, then I’ll jump in because it makes it a much safer or lower risk trade. I’ll show you what I mean by that on a faster time frame so you can get a better visual context on what happened.

So here you can see on LB we open up, people come in and they tried to buy the dip because it’s pretty extended here. As soon as I start to see that move fail, the relief move fail, because this is the point in time in the day where it’s most likely to reverse the move because it’s where the most volume is going to occur. It’s this best chance for the stock to reverse and if it can’t do it there, it’s likely going lower in the short term.

So what happened was we got the initial pop right out of the open. I saw this fail and I jumped in as we basically were turning back over here, I got filled at 18.40. Now, I took my first position here, we started to come down through 18.30s, 18.20s I added again and then I added again as we were coming down to break 18. Now I had to wait it out a little bit but I was okay here because I was still just below my average, being that I got in my first entry up here [inaudible 00:08:30] 1840. So I was just waiting, waiting, waiting. I was adding as we were sitting right around 18.20, 18.10 got the break. Got the break, I covered half as we sold through 18, covered half at 17.90, covered more as we came down near this trend line at 17.60s and just kind of held out in through here and I started to actually add again back over here. The reason I was doing that, the reason I added back right here was … There’s a couple of reasons.

First off is we’ve tested [View App 00:09:06] and we had this kind of pivot at 18 obviously that we were struggling at, at the open to break through. So if I draw a line through that, if I draw a line through this level right here, 18 we were bounced off the first time, so I added into it to get the breakdown. We finally got the breakdown and I covered some in through this move here. I had about a third of my position left after this move occurred.

So we came back up and I was watching this. So we had View App at the same spot as the pivot tested once tested twice, tested three times a little bit of a lower high. I added as we were breaking 17.80. So this is at just after ten o’clock. Now my thought on this was that since we’re rejecting the pivot, we’re rejecting View App and we’re starting to make lower highs, if I can get in this thing for another breakdown and this starts to open up, we’re going to see a huge, huge profit day.

We’re going to see a big, big day here coming, but what I was also watching for was the Spy. If you look at the Spy at ten o’clock, we talked about it this morning in the watch list with regard to this macro trend line. So for those of you guys that were with us on Facebook live this morning, or were in the chat room watching the technical breakdown this morning, we talked about this major macro trend line that comes off the daily. Just real quick to recap it, it starts at the end of last year when we had the blowout into late December. I connect that with the next most major pullback here, which comes in June, extend that line out. This is a very major macro trend line. We retested it from the underside and we cannot get through it. Plus we have a 50 day, another pivot in through 294.50, a lot of resistance overhead.

If significant resistance cannot be taken out, you are going to see a hard reversal. We talked about this this morning. If the Spy cannot get through this trend line on the initial push, you are going to see a move lower. That’s exactly what happened here. Look at this acceleration to the downside volume sell, volume sell, since we rejected that, this stuff is really key. It keeps you well ahead of the price action. If you know how to read this stuff and know what to expect, teach this in great detail in the courses, but we were able to predict that this was going to happen because of the type of resistance that we failed to get through.

So that said, we were looking at this at ten o’clock. So look at ten o’clock, we were failing this lower high, we were breaking through the pivot. We started to get some really nice acceleration here right at ten o’clock. So back to LB, remember I’m in this with a third of a position left, but then I come back and I’m starting to re-add to this because now we’ve got the market in alignment, we’ve got a really weak stock and if this thing starts to break down and get through lows one more time, we’re likely going to see a move down towards 17 and that would have been just a really, really huge profit day.

So what I was doing here is adding that 17.80 and it failed. It failed. I added back to my full size, which I had this morning, I added another 7,500 shares here and I was going to add more as we broke the lows but what happened was is that we didn’t obviously make lows. We started to turn around and as we popped up through here, I had to cut the position loose.

Now what happened between 17.80 and 18.15 that’s a big move. That’s a sizable move. So from 17.80 to 18.15, you’re talking 35 almost 40 cents and when you have 10,000 shares, that’s a good amount of money. It’s four grand or more and I was up almost near 10,000 but I was trying to see if we could get this to break down because if it did break down, just again a monster trade, but instead it turned around and came back up and I had to stop out because I didn’t want to give all of it back from what I had locked up.

So you have to do what your signals are telling you and the signals were telling me that the market was going lower and we typically will see stocks follow the market. So I took a swing based off of what I was seeing technically and technically what I was seeing is the market was breaking down and we had a really weak stock that had potential to continue below the trend line but unfortunately today it didn’t want to continue. While it’s still a good … it’s a good day, it’s a green day, it’s nowhere near where it should have really played out to be but I realize that’s part of the strategy and for those of you that are working on sizing up your trades and looking on trying to lock in bigger wins, you have to understand that this is part of the strategy. This is the trade off but when they do go, you’re going to make a lot of money.

If you don’t take these steps, you don’t take these steps to try to increase your position side and increase your profits, you will never hit the home runs. So if I never added back here and I didn’t wait for the breakdown and I didn’t do it on any other trades, I would never hit home runs but you have to swing for the fences when the setup and market alignment is there because more times than not it will work but today was one of the days where it just decided not to work. Maybe it was too extended. Maybe this trend line that we talked about was stronger than initially thought and it was bought up off that level and it just kind of grinded back. But either way, I’m still happy with the trade. It just was one of the days where the home run swing didn’t connect and we had to settle for a little bit less than we would have liked. But all in all, it was a good trade. Really nice entry on this.

Again, when you have these trades that are kind of extended, instead of jumping into the momentum, you want to wait for the first relief move to happen and then if it fails, that’s your entry point. As soon as you start to see fail, you’re in. Really important, a key point right here for entries as opposed to stocks that are opening relatively flat and then start to sell because those you can jump right into the momentum. So if we look at another one today, I think it was SPLK. SPLK, this one we had on watch and you can see right out of the open, this thing just plummeted. Right out of the open because it opened flat. It opened right on as 200 day. It wasn’t extended, it was just sitting sideways right out of the open. This is something that as soon as the market opens and starts to sell, this is where you can get in a trade and jump into the momentum, as opposed to a stock like LB that has an extension to it. Coming into the open, it’s already made a big move.

You’re likely going to see, 90% of the time or more, you’re going to see the stock try to reverse because again, it’s the best chance for this stock to make a full reversal or a hard reversal. It can’t do it right at the open, it’s going to go lower. So that’s where you really want to jump in because it’s the lowest risk entry because you’re basically trying to pinpoint where the weakness is and the weakness is, is when the the buying stops and that’s how you see it, is on fast time frame, when the move up fails.

So anyway, pretty decent trade on that today. Definitely, we’ll lock it in. Definitely, we’ll add to the bottom line, that’s for sure. So anyway, we’ll get back at it first thing tomorrow to try to close out the week strong.

Hey everyone, thanks for watching the videos. I’ll continue to make sure that all of the watch list as well as the recaps are available to all of you. Make sure you subscribe to keep up to date on what’s hot and what’s not in the market.