Warrior Trading Blog

Technical Difficulties! +$47 on $AEO | Mike’s Trade Recap

mike_9.4

Hey, what’s up guys? Back in the markets today after a holiday weekend. The action still continues to be a little bit slow. I got held up by a little bit of a technical difficulty this morning on my platform. For some reason, I was unable to open new positions, couldn’t really get it figured out in time to capture a move that occurred, but that’s okay. The good news is, is that I was able to close the day just slightly in the green with the shares I got filled. That’s always a positive, not to be caught on the wrong side of a trade when your platform is malfunctioning.

Anyway, we’re going to talk a little bit about that today and also about the setup that we had because there was a really important technical moment that took place in this stock that you can use in your trading to locate these high probability setups. Let’s take a minute and break down today’s trade.

All right. Good afternoon, guys. I want to do a recap here this morning of today’s trade. Unfortunately, I had an issue with my platform this morning, and I kept getting error messages as I was trying to open up a short position on this AEO. I’ve gotten an error… Just for context, I’ve been using Light Speed here for almost 10 years. I’ve never seen this error once, so it’s very strange.

I was unsure as to what it really meant. The error message read “unable to open new position on symbol” and that was AEO. As I was trying to continue to punch the orders to get short on this thing it would not fill. Told me that I couldn’t open a new position, so I closed down and restarted my platform. I tried again, and I was able to open a position, but now it only allowed me to open a max of 500 shares. Then, I just got out of that because it filled me at kind of a wrong spot, and I didn’t really have that much of a position to sit around waiting for it because the stock doesn’t move that much. I needed a lot more size to make it worth my while.

I just got out of that. Then, I tried to figure out the platform issue, and I decided to call it a day because there really wasn’t much else going on. I’ll talk a little bit about the trade, but you could see I basically just got out of the trade. I was green thankfully. I didn’t get caught in a bad position going against me or something like that. That’s always a positive because I have had situations where the platform malfunctions or you have a hotkey malfunction or something goes wrong and you get caught on the wrong side of something and it can be very painful. I’m just glad that didn’t happen. The fact that I’m even flat and slightly green is always a good thing, but let’s talk about the trade itself.

Talk about where I tried to get in this thing and what I was looking for because it was a very good technical setup. There was a very good entry on this to get a nice trade-off, but that happens. It’s nice it doesn’t happen all the time. This is, like I said, the first time it’s happened to me in quite a while, but let’s take a look at the trade here and talk about the action that we had.

First off, AEO earnings gapping lower this morning. The first thing I notice about this is we’re gapping back below a recent swing low pivot. All right? When I see that, the first thing I do is mark that off because that is essentially the short term low for the stock. It’s basically taken out its lows.

But then I looked back and I see that we have this pivoted through here, which was essentially the entry to a very minor gap. It was a gap, but it was a very minor gap. But the fact that it was a pivot in that we had a test here and then we gapped up above that and we held that as support and then we ran, that’s a really important technical point. It lined up exactly with this recent low pivot. I wanted to use that level as an area of support and it would become new resistance, but that was a very important level to watch, 14.55. Then I looked for any tread lines, any significant lines that we had, and I used the low before that as the first anchor point and connected at 14.55.

We had our ascending support. I also noticed that we had a little bit of descending support. Okay? Used this anchor point, it was the former swing low, and I connected that recent swing low. You can see that in this zone, we had a big level of… A big confluence point of resistance. What I was looking for is to pull away from that, it could fill this pocket down to the next pivot, which was down here, around 12.68, 12.70-ish. All right? Right in through this level is where I get that pivot.

Now what happened here on the open was we started to get a move. Let’s look at the fast timeframe first because that’s a little bit more clear. But if we look at the fast timeframe, which you can see happened is that you had this initial sort of pop and you tested the pivot.

So if you look at this as I was watching it in real time you can see we’ve got a little bit of pop up. You tested the pivot, you tested the trendline and you started to fail. So I got short as you or I stopped. I tried to get short. As you failed that pivot and you started to pull it. And I tried to get you around 14.30, kept punching the buttons and just really no response from the platform outside of these error messages. But that aside, we’ll talk about the setup itself.

So you get the rejection of the pivot starts to fail. So the move up fails immediately. And that’s when you want to look for the reverse back or the overall continuation, which is to the downside. So as we started to fail that pivot your entries here, 14.30s and then you’ve got a nice move, a quick move down through 14, which you know, that’s a two to 3% move right away, which if you have a sizable position, that’s a great trade, right?

That’s a quick hit and a really nice piece of profit that you could get. All right, so that happened to kind of reclaim 14 quick, started to run back up and at this, during this time I’m restarting my platform, trying to see if that’ll fix the issue and it’s kind of retracing and I was waiting to see if it would come back and test this 14.55 again. Because if that was going to test again and fail, I definitely wanted to be a part of this, to take it back down through the lows. So we started to come back up. Sure enough, we test the 14.55, we test the trend line and we fail. All right? So I tried to get short here again with two big blocks, same error message. No luck, no fill. All right?

So then from there you can see reject that pivot and you just fade all the way back down through the lows. And that’s a big trade. That’s over 50 cent trade on a $14 or $15 stock. That’s a very sizable move. So a lot of profit potential to be had in there, especially with such a low risk entry off of a huge pivot point. All right?

So that was the trade I tried to get off on that and unfortunately some technical difficulties today, but you know, that’s gonna happen every once in a while. So one thing I do want to point out on this real quick is the significance of these swing low pivots. And whenever I see this set up on a daily chart of the stock that we’re watching, I become very interested. This is going to quickly move to the top of my watch list. Why? Because in order for you to get back through, back up above the recent low pivot of a stock takes an extreme amount of strength and volume to push back through that.

All right? If it doesn’t happen, if it can’t hold back above it and push, then you’re likely to see some very nice continuation on this. Especially when you have a confluence zone of support. So think about, think of this as a ceiling, right? The stock fell through the ceiling, how does it get back through, right? It has no way to climb really back up there and it’s very difficult for a stock to jump back through a ceiling. All right, so that’s what this is occurring right here. And every time or anytime I see a setup like this, I become very interested. I’m going to watch this very closely because they are very high probability setups, especially after they retest and fail. So that’s why I was watching AEO so closely this morning to get that move off that level and take it down for a nice short trade.

But that’s how it played out. I know on a five, it doesn’t really look like there’s much movement, but you know there, there was definitely a good amount of movement in here trading off the fast timeframe, waiting for that confirmation of that fail, get short and then take it down for a good 50 cents. So that was what we were looking for today. Unable to capture it, but you know, we’ll get back at it first thing tomorrow. We should have it resolved. I don’t see why not.

But other trades today, you know we had COUP on watch for a long above pre-market highs. Obviously this thing made a nice run but really tough trader, widespread, tough to manage risk. And we talked about that before the market opened. We knew that it was going to be that way, but it wasn’t one that I wanted to really get involved on. There’s a little bit too volatile for me. I couldn’t really build a position in this. I mean, you’re moving around, you know, three or four points at a time here. You gotta really be quick and quick to stop out. Plus the spreads are wide.

So you know, if you’re trading to a smaller size though. This did make a really nice move. Pull back the view app and hold you got back above the pre-market high and kind of held here. That was the long trade, right? Because here you just pushed above it. You never held and pivoted above it. The important thing is to get above and pivot, just like you did here and push. So that was your entry around 150, 140, about 9:35 AM and then you’ve got that quick move. But again, came right back in and basically to that entry point and then it took off again.

So although it’s just a tough trader, it’s kind of whip, you gotta be fast, you know these downdrafts are tough to handle, right? If you’re like getting long here. I mean, I know this probably hurt a lot of people because I could see why you would take this long here. You’re trending higher, higher lows. Looks like you’re essentially breaking out of a bowl flag, right? And it looks pretty decent to take this long and then all of a sudden you just get the bottom dropped out on you. And that’s a really tough situation. And that’s why usually when I see stocks that have widespread and tough to trade price action, I typically just steer clear them because if I get caught in a move like this with, you know, 2,000 or 3,000 shares, that’s a problem. And I just rather not trade or sit tight and wait for a better opportunity to come up then try to risk this type of move. Because this is unknown risk. And I know that stocks like this tend to trade like this often. So I just typically stay away from those types of stocks because things like AEO that are much more liquid and have a lot of volume are much easier to manage. You know, they’re not gonna move as volatile against you. So they’re little bit more manageable and a little bit easier to trade, and ultimately that equates to lower risk.

So anyway, I’m still lacking quite a bit in the momentum for large caps. That’s been a couple of weeks now that we’ve seen the slower action. And you know, the good news of it though is we are starting to push into what’s typically known as the best time of year to trade. And that’s going to be into the autumn and fall, fourth quarter of the year. So we’ll just kind of have to sit tight and patient and then wait for that action to return. Because when it does and the later part of the year here at fourth quarter, it starts to get a much more fun. So anyway, we’ll wrap it up there guys. I’ll see you guys back here first thing tomorrow morning.

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