Warrior Trading Blog

Winning on Wednesday +$3,800! | Mike’s Trade Recap

October

Hey, what’s up, everybody? Well, a really nice way to end the month of October with one single trade on Facebook for just over 3,800 bucks. October’s been kind of a tricky month in that I was stopped out on quite a few trades, but the ones that worked ended up being really nice trades.

 

Definitely confirms the importance of playing defense in a volatile market. Ending October in a really strong note. We’re going to look to start November the same way, but first, let’s break down today’s Facebook trade in today’s recap.

All right, good afternoon, guys. Well, a really nice way to end the month of October here. Up just under 4,000 bucks on one single Facebook trade today. Really nice way to end what’s been kind of a funny month. I’ve been stopped on quite a few trades this month, but the ones that worked actually turned out very well. Taking small losses on the trades that didn’t work was very important, playing a lot of defense, waiting for those significant setups to present themselves and becoming aggressive.

Again, really nice way, just under 4,000, 3,800 bucks on one single Facebook trade today. Let’s take a few minutes and break down how this trade played out.

First off, earnings on Facebook, stock’s definitely going to have some movement to it. We just have to map out the technicals to see where it will end up trading. This morning, we had a little bit of a gap back higher here, but we had a very significant pivot level here near 160, and it’s critical resistance. You could see that this acted as very critical support here over the past several months. Once it broke, it finally broke down and made a real clean move through this pocket.

Now, that was above us today, so that becomes resistance, and it becomes critical resistance. We also have this, a very well-established descending resistance line that falls in a very close proximity to that 160 level. Now, that makes this a big confluence point, which acts as very heavy resistance. You can see kind of the same thing back here in September where you had a pivot and descending resistance. You can see how it reacted to it, how we’re kind of doing the same thing today. Critical pivot. Descending resistance. It’s definitely not something you want to do is go long into critical resistance or short into critical support. It’s a very low-probability and high-risk trade.

As traders, we’re not looking to do that. We’re looking to take low-risk and high-probability trades, so want to stay away from that type of approach. What I wanted to see today is one of two things. Either we reclaim the 160 level, and we hold, and the market gains strength, and we run. Big pocket up to 171.

Second scenario. We fail that, and we fail the 20-moving average here, and we drop back lower. We start to fade. Well, scenario two was what happened today, but not for quite a while. It was a late-day trade again that played out. Looking at the five-minute chart here, you could see where we were at in the pre-market. We were kind of stuck between the levels. That’s typically a point in the price action where I stay away. I really want to see one side of the action trigger before I actually become involved in the trade. Until then, I just stay put because the dealing with this whipsaw chop is definitely not something that you really want to get involved with. It just becomes frustrating, difficult trading that. It’s not just not worth your time.

What I want to do is wait to see if we started to break down through this 20-moving average here, and then that’s where I would look to take the trade to the short side because then our level triggers. We had room back towards this pre-market support here around 150, and then potentially all the way back down if we really started to fade.

But either way, plenty of potential for a day trade on it. What happened was, you can see this morning started to sell a little bit, some profit-taking going on back towards the 20-moving average. It tested it right away, and then it popped and started to come back up. Looked like it was going to resolve. Rejected those pre-market highs, and just started to chop out here.

Then we started to see this selling come in. The bulls were sort of exhausted here, and they couldn’t push it any higher after that moving into pre-market, and typically, when you see that, it’s not a good sign for the stock to continue higher just because there’s no urgency in buying here, and we typically see those stocks fade.

We were talking about this earlier in the chat room about how these types of stocks, as soon as the tug-a-war ends and the momentum trading hour comes to an end, when everyone’s done trying to get it to move in one direction is when it will make the move. That’s what typically always happens on these higher-priced names. I was very cautious to trade this this morning early because I know that that’s what the typical result is, is just to wait later in the day until everyone’s done trying to move it, and then it ends up making a nice clean move.

What happened here, we started to formulate a really nice wedge. We had this decent resistance. We had this really nice flat bottom here, right against that 20-moving average, and we started to break down through that right here.

As we started to break this, I wanted to see that five-minute close below because that’s what confirms the trigger point. We get the close. It happens literally right on the 20-moving average, so in a situation like this, what I do is I dial into a fast timeframe to start to see the granularity of the price action. Then that’s where I’ll make my decision as to where I’m going to enter.

Here, we’re on a much faster timeframe chart, and here’s the test of the 20-moving average. We start to sell into it. Test, test, test. Now we fail it. That’s good, but I want to see a retest below and a hold, and then that’s when I’ll get short. I don’t want to anticipate because these types of anticipation trades, this is what can happen over here. You get this tap, and then this big bounce. You don’t want to see that.

What happened here is we want to see it break, confirm below, retest and fail, and then that’s when we get short. What happened here is I, once it did that, broke, had a little sidestep here of the failure, and I got short right at 153. Started to sell down at 153, and just held below that really nicely. I added into the position, came back, and just worked out incredibly well. We covered all the way down through 149. Basically every point. I covered some at 152, 151. I covered more at 150.50, and then I covered the balance as we crashed through, actually, it wasn’t until later in the day here, but right near 149.70. Right in through here. That’s where the balance I covered.

That was it for the trade on Facebook. My stop on this, where was my stop? That’s a lot of the questions that I get. Where do I put my stops on these higher-priced names that have a lot of volatility? The truth of the matter is, is you really don’t have to have that wide of a stop. You just have to have it very calculated. You have to know where the levels lie that it’s responding to.

Basically, what I wanted to see here is it failed this 20-moving average, and once it had tested and rested and failed from the underside, there’s no reason for it to go back up because that’s confirming the weakness is there. Once this failed and retested, I was short at 153, my stop was above this last wave right here at the 20-moving average, so about 153.25 or 153.30. Very tight stop for Facebook, but this is one of those trades that it’s breaking pattern, the spy’s starting to fade, and this is one of those trades that’s, either it goes or it doesn’t. Either it goes or it doesn’t.

Once it started breaking, it broke the wedge, and then it started to break the 20-moving average, there’s no reason this thing should be turning around, so that’s why I typically have very tight stops on these and take a little bit of size, and then once it starts to move, we try to hold real tight to it because we know that these have big potential. Once it broke below, I was in at 153. My stop was above this last relative high wave here, above that 20-moving average, about a 30 cent stop or so, and then we got a really, really nice move.

In any event, that was the Facebook trade today, guys, ending the month of October strong, and going to sit tight for the rest of the day and see what else may show up, but we’ll be back here first thing tomorrow morning to do it again and start off November on a strong note.

Oh, hey. I didn’t see you there. Well, I was just working on the dream board for my next home run trade. Hopefully, it comes soon. Until then, make sure you subscribe to get email alerts any time I go live or upload new videoS. Until then, happy surfing.