Warrior Trading Blog

Stopped Short For -$1,400 | Mike’s Trade Recap

Hey, what’s up Guys? Yes, unfortunately it is another red day for me. The second red day of the week, on my second trade of the week. There just hasn’t been that much action to work with in the market. The volume and the momentum has been lacking really hard and that makes our job very difficult. So I tried two trades this week, and I’m running on both of them. But the most important thing here is to keep those losses small.

Now one thing to take away from this is that your losses should never be bigger than what you’re comfortable making in one single trade. So for instance, today my loss was about $1400. That’s nothing I can’t make back, plus much more, in one single trade. So as long as I’m within that parameter, I know that I’m keeping things in check.

Alright, so let’s take a few minutes and break down what happened in today’s trade. The short out of the open.

Alright, good afternoon, Guys. Well unfortunately today is red day recap number two of the week, and it’s just been kind of a slow week. Haven’t been active that much and the days that we’ve been active, it’s been tough to get something started. So going to end the day down 1436 today. I tried to get a position on MU, started a short side and with the market kind of whipping all over the place, just no resolution, so I decided just to close it out and close down the platform and call it a day. Tuesday we took a trade, down 900 on that one, and today was the only other trade of the week for 1400 so we’re down, roughly $2300 on the week, which, no one ever wants to go out the week red. However, that number is nothing that I can’t get back easily in one trade, and much more. So that’s what the important part is, is keeping those small until you come across the good trades, and then these losses are very minimal.

So let’s talk a little bit about MU here, and what we saw on it. So yesterday, on MU, had a pretty decent move up, where the whole sector is moving up. AMD was moving up, MU was moving up, and then this morning, you had a downgrade to a sale at one of the tier one firms, and we were back below the 200 [inaudible 00:02:30] so couple things that were going on on this, is that we were giving back yesterday’s move. We were back below the 200 day moving average and we had room from the 200 down towards the 20 day. Now that was plenty of room to get a trade off. We’re talking from 4250 from down to roughly 41, couple percentage points, and the stock like MU, that trades a lot of volume, is very liquid. Could easily build into a big position and get a couple percentage move and have a really nice day. So that’s what we were looking at this morning, at a great pre market pattern, if you were looking at it this morning with us. You could see gap down, didn’t really get much relief move, started to kind of creep in towards the low, here, into the open, and I was looking to get short as we kind of broke down below this 4220, 4230 level. See if we can get a quick move down, roughly to the 20 day, which was at 41.

So we liked the fact that it was giving back the move. We had down grade on it, and the market was looking relatively weak. It was sitting back at that 28660 pivot, and we weren’t seeing much buy pressure off that. So looking at the daily chart on this, these are the levels that we had. Obviously, into the 200 day, and we had room to fade back towards essentially the 20 day, which was down near 41. Right, a little bit of a pivot in through this 4174 point, right in through there, but you definitely, easily could have gotten there, and then back to the 20 day, what is what I was looking at. So coming into the open, we looked pretty decent. Alright? So from the fast time frame, show you what I looked at there. And where I got short was pretty much right on this big rejection right out of the open. So we had this big candle pop up and reject. Goes all the way back down and I got short as we were coming back down. I got short at 4250.

So 4250 short, I was looking for a break down. 4230’s, 4220’s started to happen, right, you could see it started to happen in through here. It looked pretty good. Testing view app, we were failing, and what happened was it basically double bottomed in through here, and then popped. Now I’ve stuck in this until we got, at the 200 day, and I added more at 4290. Alright, that brought my average up to 4270. So I had an average right in through here and I felt okay about it because we rejected the 200 day and we started to drift back in, it made a lower high, and then what happened was we started to round back out and as soon as we put in this pivot right here, the first time we popped above, we pulled back in. Right, no pivot above it. Popped back up again, pulled back. Now we pivoted and we’re trying to make another high so I stopped out at 4320.

Let’s see I was in this at 4270, roughly, stopped at 4220, so that was at a fifty cent loss and I had 3000 shares. So that’s where the $1500 loss comes from, or $1400 loss. Again, it’s so well within my max risk. I usually have a fifty cents stop, kind of a max, and that’s what I was using as that max back stop. So once we had that pivot put in above the 200 day, I said, “You know what? It’s holding. We’re not seeing the weakness come into this. We’ve got a pivot above the major level now. I am going to get out.” But I wanted to try and give it a chance up against the 200 day to see if it hit, and it failed, and then rolled all the way over. Just didn’t do that. I remained patient with it, I was hoping we were going to see a little bit more weakness off the 200 day, but it held up above VWAP, and then once it put that pivot in, those pivots above or below the well levels are very, very powerful. So until you have one of those, you don’t really want to be making a decision on the stock, and I didn’t make any sort of rational decision to get out too early, because we didn’t have a pivot put in over that level until here, and that’s what stopped me out at 4320.

Alright, so again, didn’t get the continuation we wanted. Just didn’t really play out. Later end of the day, it started to kind of roll over and fade here, but I didn’t try it again. I was approaching the max loss point and the market, on the whole, has just been really difficult. There has been a big lack of momentum and just unpredictable action. Not really much news to deal with and when you have that sort of unpredictability and those kind of choppy conditions, it makes trading very difficult. So I decided just to stay away the rest of the day and going to close down just over 1400. But again, what’s important is is those losses are relatively easy to get back in one single trade. You don’t want to dig yourself in too far of a hole that you can’t get out of in one single trade. That’s really important. So if you’re trying to figure out what your max loss may be, you want to ask yourself, what do you feel comfortable making in an average good winner? Right? Your losses should never be bigger than that number. So I know that I could, on average, feel comfortable making at least two or three thousand in one trade. I know that my max loss shouldn’t really be more than $1500 to $2000. That’s why I stopped where I did today.

But again, good set up into the open. Back below 200. Market was looking weak and we tried for the break down out of the open. Tried to anticipate it after this big rejection but unfortunately just didn’t work. And that’s just part of it. The market is not going to be hot every single day for weeks on end, so you got to be real patient and only try when the best set ups present themselves and today MU did have a good potential set up to it, it just didn’t end up playing out the way we had anticipated, which is okay. Can’t be right all the time. So anyway, we’ll get back at it first thing tomorrow morning, Guys. Everyone have a great evening.

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