Warrior Trading Blog

Trade Review | The Picture Perfect VWAP Fade on $LB

vwap fade

Trade Review | The Picture Perfect VWAP Fade on $LB

 

Here is a new blog post about the “behind the scenes” of my trading days. As you may already know if you’re part of the Warrior Trading family, every day I invest about one hour and a half during pre-market just scanning the market in an attempt to hunt for trade ideas and build up a plan for being ready to execute it once the bell rings. In fact, a trade plan is as much important as its execution.

One of my favorite strategy is the so called “VWAP fade” (which is of course part of the WarriorPro course precious material) which basically consists of playing a trade to the short side using the Volume Weighted Average Price (VWAP) as guidance for executing the plan.

It’s amazing to observe how often this kind of setups repeat themselves. There are literally several times of this one setup happening every single week. Yesterday, it was the case for LB (L Brands, Inc).

As soon as the market opened, I immediately recognized that there was still weakness following pre-market just by watching the price/action as it unfolded. In fact, every attempt to pop and hold above VWAP was getting rejected nicely.

In the end, it never got the chance to close a 5-minute candle above it. In addition to that, the SPY was selling off and this one fact could have helped the move to go further down. So, I decided to open a short position given the fact the profit / loss ratio would have been higher than 2:1.

Here are the details about the promising daily chart:

vwap fade

Strategy: VWAP fade

Direction: Short

Entry: 49.30

Stop: 49.75 (previous 5min candle high)

Target: 48 (daily pivot)

P/L ratio: 45c vs $1.30 (2.9: 1)

Time in the trade: 30mins (all-day for further gains)

As soon as I’ve opened the position, the trend continued lower and the price got closer to my original target. As expected, some serious support came into play at that $48 level. So, I took the majority of my shares out of the trade at that point. I held the final ¼ of my position through $47.40 for almost $2 profit per-share.

Here is how 5mins chart looked like on LB with details about the trade:

vwap fade

 

I’ve alerted all my trades live in the Warrior Trading chat-room. The trade also offered a nice possibility for an add or for a new entry once it set up against VWAP and couldn’t hold above it at around 10:45AM. At the time, it finally fell hard initiating a drop to new lows that lasted all day, with a low of $46.21, more than $3 from my original entry.

Overall, a really great trade that worked exactly as for plan, locking up a solid profit within 30mins into the day, with possibility for more profits throughout the day.

 

“One and done” was the motto that resulted in a positive way again. Being selective is really the key to every trader success (read more about it in my previous article here).

 

Trade safe,

 

Roberto Barbaro