Warrior Trading Blog

$TSLA Takedown +$9.7K! | Mike’s Trade Recap

Mike_7.25

Hey, what’s up guys? Another super solid trade this morning, just shy of 10000 bucks. A real home run trade after trading Tesla to the short side on the earnings report. Just was an incredible setup, an incredible price action, really nice momentum in volume. Everything came into alignment including the market, which really helped drive this trade. So I wanted you guys to stick with me here as I take some time to review this trade because there’s a lot of teachable moments, especially how to know how to become aggressive and actually how to add into your trade as the move continues, to really lock up these big wins. So let’s take a few minutes and a recap the Tesla trade.

All right, good afternoon guys. Another really, really solid day here of trading. I’m up nearly 10000 on Tesla. Just an incredible set up here this morning, incredible price action, incredible volume profile. You really couldn’t have asked for much more on this stock or for any stock this morning. So definitely, some good action we’ve seen here over the last week or so, but doesn’t really seem to be consistent. We’ll see the action flip on for a day or two, and then it’ll go right back to being really light and choppy. So when these days do come, it’s so important to become aggressive and really, really press into the trade because these are the ones that, they can make your month. A couple of these trades a month and you’re done. So again, just like to emphasize the fact that it really only takes one trade, right?

And if you just sit and wait for those to present themselves, you’re going to find yourself with much better results. So really nice trade today on Tesla. I’m going to take some time to break this down. There’s a lot of things about this that really shaped up in our favor. So let’s go ahead and take a look at this trade here.

So first off this morning, Tesla gapping lower on earnings, gapping into a major pivot point here at 23450, all right? So let’s just look at the daily first so you can get an idea of where these levels come from and why we chose them and then how we use them. All right, so the first level that I like to use here was this 23450. Now you might ask why or how did you pull this level? And the reason I liked it is because you had two things going on here that I saw and I always tend to look for the biggest swings in the market or that work closest in our area that we’re trading.

So right here I can see that this had a big move off the bottom. This was kind of the first rejection that we had that was somewhere in our vicinity of where we were currently trading the pre-market. I look back, it also correlates with this high right here. So those two alone make up a nice pivot point. But then you look over here and you see that there was some price action around here that had struggled that, but once it got back above it, it started to push higher. It held and pushed higher. So I wanted to use that 23450 pivot and sometimes it helps to back out the chart and kind of look to see if you can see those levels from a little bit different of a context. And I can definitely see in here that this was some resistance on the way back up a couple times.

So you know being that, that was identifiable like that, I put it on the chart as a level. Now below that, we really didn’t have much in the way outside of the 50 day moving average, which is this blue line. Below that, we had another little pivot in through here around 20770s. Just below 208 where we had a little bit of a support level, but you can see that because again, this is where it broke down from, came back up, one day retest, two day retest, third day gets through it, but then sells all the way back and tests it to the penny and then starts to resolve up again. So this is a definite pivot point that we wanted to watch. And the fact that we had this type of room between 23450 and 207, that is a big pocket. That is a very tradable pocket. And also the fact that Tesla is breaking down on the daily chart, as an overall pretty, pretty hard downtrend here. That’s something to definitely keep in mind as well, right?

These are trades that just because they gap up or down, if they’re in a hard downtrend or a hard uptrend, it doesn’t mean that it’s a long or a short, right? You have to kind of look at everything in a broader context. And the fact that we were gapping down and we were in a downtrend on the stock overall, definitely helps the situation.

All right, so those are the levels that we have pretty simple, right? We had one pivot here and then basically one pivot here and then the 50 day moving average essentially splits them in half but still plenty of room on either side for this to take a trade.

All right, so now that we have the levels plotted, I go back to my five minute chart here and we try to look at the open action and see where there’s potential to have taken an entry. So one thing we talk about is that, we had this sort of almost a triple bottom if you would, in a zone roughly around this 23450 point. It was definitely holding, it was definitely valid. So the fact that we were consolidating along that line, we were putting lower highs into the open and we had broken down below, here’s your 20 day, and your hundred day moving average.

Then we had this big wide open pocket below. It’s basically looking over the edge of a cliff, right? So if this could open up, we got some volume to come into this. It’s a very good chance this could sell all the way through this pocket at least to the 50 day and then go even more if it was really weak.

So knowing that we had about 13 points of room just in this pocket here, there’s plenty of room for us to get a nice profit on Tesla. So I saw this coming to the open. It was setting up really well.

One thing I’m really particular about is that when a stock opens, I need it to open up at or very near it’s supporter resistance point, right? And that would be like Tesla right here. It’s opening right near this 23450 point, a heavy pivot point. If it opens mid range, if it were open somewhere in here, that means it’s a lot more likely the socket of whipsaw around a lot more before picking a direction.

So basically what happens here is the probability gets skewed, right? Because you could pop up real quick and test the pivot, then turn over, or you could just sell straight down. So it’s a lot more unpredictable if you’re opening mid range. If we’re opening at or near a very significant support of resistance level, it …