Warrior Trading Blog

Sour Apples -$2.2K | Mike’s Trade Recap


Hey, what’s up, guys? Well, it’s a red day recap, and unfortunately, with the good days comes some of the bad ones and today’s one of those days. We hit Apple, and I took about a $2,000 loss on it out of the open looking for a gap fade, but unfortunately, it didn’t end up selling, and we had to manage the trade. It just got away from us a little bit. It was just one of those days. Sometimes they happen, and they happen to all of us. Just understand it can’t be right 100% of the time and learning to accept those types of trades and just move on to the next one. Let’s take a few minutes and break down today’s trade on Apple.

All right, good afternoon, guys. Going to do a recap on today’s trade on Apple. It’s a red day recap. I obviously don’t like doing the red day recaps, but with the good stuff comes the slow stuff or the not-so-good stuff. Today was one of those days. The loss itself is not really upsetting to me. It’s more of the action market. It’s just the lack of consistent tradable action over several days or weeks that we’re just not getting that. It’s, flips on and then flips off, on and off, so you can’t really get a consistent read on what’s going on, and that means constant adjustment, and it makes it tough to just really get on a roll.

We had a really good week last week, and yesterday was a break-even trade. Today, obviously, is in the red by just over 2k. Again, it’s relatively small against the winners that we get, but it’s just the lack of consistent action that we’ve seen. That’s what’s most aggravating. The loss itself, I could really … It doesn’t upset me because I know I can get it back in one trade. It’s just the lack of consistent action that we haven’t been able to get much momentum on a consistent basis. Let’s take a look, break down the trade, and talk a little bit about how it played out.

Now, Apple, we were initially looking at this this morning for a gap fade. The reason was is because we had essentially a double top here, a lower high coming into the open, and you see this dip right before the open. This is consistent with a gap fade. One of our top go-to setups out of the open is a gap fade, or a stock doesn’t hold a gap. We basically take advantage of profit taking from people who have held through earnings and want to take some profit on the stock, so we were looking at this because of the double top, the lower high, the sale into the open. We had room to fade, especially if we got through this 208.50 level. Big pocket to open up to down here to produce some profit potential.

What happened on the open was it did exactly what we wanted it to do. We started to get this retest of this ascending resistance line that we have here from the daily, so that would be this line right here. Obviously, it’s moving through that right now, but this line right here, a very short-term ascending resistance line which you can see was reacting to into the open right before, and we started a roll, and again, that’s consistent with what we look for on our go-to gap fade setup, and then once the market opens, we look for a retest back into VWAP and then we short. That’s what we did today, so look at a faster timeframe on this. Show you what happened.

It was an interesting technical moment here that played out, and I recognized it in real-time. I just was trying to hold this if we could get a continual move lower, especially because the market. The market was just weak drifting. It wasn’t moving higher. We had a lot of things indicating that we were just going to sit sideways, if not slightly lower, and it’s why I wanted to try to hold on to Apple.

What happened here out of the open as you guys can see was … We’ll just go through this play by play. We had the initial pop, which was exactly what we look for. We had the move into VWAP and then we had the rejection of VWAP, so once this rejection happened, we put the pivot in and the retest failed. I got short as we broke down through 210. Once we go through 210, I just held it. I sat there for a few minutes to see what could happen. We quickly made lows, went right through 209.50, but I was looking for a lot more than at. All right, this is Apple. We were looking for a lot bigger move, so I was holding on this and we started to come back up.

I was okay with this. This is normal price action, and we came back to test the VWAP. We went through, came back to test basically the opening range high. I was still okay with us. I was holding it because we were still below the gap here and that’s normal, so I was holding this. We got that rejection. Now that’s really important. Once we got that rejection, we started to pull back down through the VWAP here I added to my trade. Brought my average up to about 210, just above 210, and it started to pull.

It looked really good, started to go back towards lows, and then right here was a moment that I recognized that I should’ve acknowledged this in real-time and probably just cut the trade loose, because we had a double bottom take place on a fast timeframe and a lot of volume. That’s something that most of the time I would get out of the trade when I see this because it’s not indicating that it really has that much weakness to continue, but instead, I held on to it a little bit. I wanted to see if we could reach VWAP and make a lower high because of what the state of the market and what we were doing there.

If you look at the state of the market during that time, the first few minutes of the day, you could see what was going on. We were doing the same thing. We were fading the gap. We were fading. We were on the lows, and there’s no reason that I really want to be trading against the market, so we were pulling off the lows here moving into a window, and we sold off a little bit and we still look like we were going to sale. Being that I had the market in my favor or in alignment with the trade I was taking and trying to take advantage of some profit taking, I held on to the trade for a little bit longer than I initially should have.

What happened here is once we got back above this level, this pivot, I held on to it because I knew we had … This level up here against 212 was obviously some action that was taking place. It was also where this trend line was, and we started to reject. We started to look good. We pulled all the way back to VWAP right here, and when this happened when we held the trend line right in through here, we basically held above VWAP, I said, “You know what? I’m just going to cut the trade loose. It’s going to be a red day. It’s going to be a bigger red day than usual,” because I typically try to keep those days pretty tight. This one did get away from me a little bit. It just was one of those trades that was harder to manage. I should’ve recognized this double bottom, but it happens. You can’t be right 100% of the time.

With that, that was a trade that the ideal place to get out of this trade, I probably should’ve cut it loose right here. Well, first, right here when the double bottom happened, because this is what I usually do when I’m in a trade and if the stock’s moving in our direct … Let’s say it’s fading hard and we get a point in the action where we get a double bottom. Typically, that’s where I’m going to take the rest of my profit because that typically indicates a short-term bottom. Now, so why didn’t I do it here today? Well, again, a couple reasons. The market was in our favor. I was looking for some further profit taking to take place down at this pivot level and potentially through it, so I was just holding on to this trade and looking for a little bit bigger of a move.

I should’ve probably recognized this first and then definitely should’ve looked at this part and said, “Okay, well, we’ve now cleared those opening range highs. It’s probably time to cut the trade loose,” and that was mistake number two, but again, you can’t hit it 100% of the time, and these types of trades are going to happen, but the important thing is is that typically how I try to manage this stuff is that if I have a loss and it’s within the amount that I can very comfortably get back in one trade, it’s okay. It’s really not a big deal.

Now, if I had a loss where I’m blowing out a big chunk where I’m 5, $10,000 or something, that’s a different story. That’s when things really go wrong, but today, this was just one of those situations where it got a little bit further outside of where I would’ve liked it to and took a little bit bigger of a loss, but it’s still within a very comfortable amount that I could come back tomorrow and get that back and plenty more on one single trade as you guys know, so that’s the trade for today, guys.

It just didn’t work out, but once it held above this 212 level … I’m sorry. Once it held above this trend line and the VWAP, you can see it had some nice continuation on this throughout the day and it’s still looking pretty good coming in here to the later afternoon, but one of the other ones I had up that actually did end up playing out really nicely was this TWLO.

This was a really nice gap. This was what I was looking for on Apple. All right, and the reason I was trading Apple was because we got a little bit more volume on that, but this is essentially what you want to look for on a gap fade. Look what happens here the end of the open. You can see here on the five-minute, big gap up, lower high. Lower high come into the open. You start to sell coming into the open. That’s exactly what you want to see. Then you get a retest of the VWAP.

All right, go to the fast timeframe. You can see it as clear as day, and there it is. Quick sell. There’s the retest. There’s the fail. There’s where you get short, and just a beautiful resolution to the downside. All right. Why didn’t I trade this? Well, I was focused on Apple because I knew that there would be much more liquidity, a little bit easier to manage, a little bit lower risk. TWLO is typically a very volatile name, so I decided to focus on Apple and I got caught up in that trade and I missed this opportunity, so it’s just one of those days, but that’s okay. We’ll get back at it first thing tomorrow, guys, so see you all back here bright and early.

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.