Posts Tagged ‘ Trading Theory ’

The Anatomy of A Selloff—Netflix

Aug 20th, 2015 | By | Category: Steven Spencer (Steve's) Blogs
Netflix has been the #1 momo stock for the past few years. Recently, its ascent began to accelerate at an unsustainable pace. When a stock begins to behave like this it is time to look for low risk high reward entries on the short side. Here are a few things you can look for as clues when to open the short position: Stock has failed several times to make a new closing high after a recent large run up A series of new significantly higher price targets that don't cause the stock to move higher Deteriorating market conditions In the case of NFLX we had all 3 of the above in the past week or so. Here are some tweets I Read more [...]


Jul 28th, 2015 | By | Category: Steven Spencer (Steve's) Blogs
The after hours price action in TWTR was epic. The market had been anticipating a large move following its earnings release based on how pricey its options contracts were prior to the announcement. And TWTR certainly didn't disappoint. After closing the regular session at 36.50 it traded above 40 when its earnings were released. It beat on both top and bottom line and gave in line guidance for next quarter. As the stock has been hammered past six months it made sense it would trade higher if it reported reasonable numbers. As you can see from the chart below after the initial move to 40 it sold back down to 36.50 before grinding Read more [...]

Study Price Action & Stop Being A Silly Troll

Jul 25th, 2015 | By | Category: Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
Back in April I tweeted a picture of a SPY chart that I thought was rather instructive. Here is the chart: A few things we can take away. The first is that the SPY 204.30 had been tested in February and then again in March. The bounce in March was very fast moving from the low to SPY 211 in four trading days. Often, when a market moves very quickly from a low to a high that move is unsustainable and we will have a re-test of the low. The SPY in fact did drop very quickly back to the low in late March before taking several weeks to climb its way back to 211. This second move to 211 was slow and steady with many market Read more [...]

Netflix Reported Earnings–This is What Happened Next

Jul 19th, 2015 | By | Category: Steven Spencer (Steve's) Blogs
I have been trading "momo" stocks for almost two decades. What makes stocks like NFLX, TSLA and FB so enjoyable to trade at times is the almost monolithic behavior of their large investors. This behavior greatly increases the risk/reward for short term trading setups. That is why I always spend time covering these stocks in detail in our AM Meeting when they have a well defined news catalyst. This is in stark contrast to virtually all other large cap stocks, especially commodities, that have many different types of players cluttering the price action at most times. Netflix is comprised primarily of momentum focused investors Read more [...]

The Basic Truths of Trading

Apr 8th, 2015 | By | Category: Bruce Bower
**This is the second in a series of posts from Bruce Bower related to "Peak Performance" the topic of his new book that SMB U will be releasing April 20th** **SMB will be hosting a free webinar on April 13th in which Bruce will discuss in depth the concept of "Peak Performance" and how it can be applied by all successful traders and investors. Sign up HERE.** By Bruce Bower In "What does A Winning Methodology Look Like?" I suggested that to be successful in investing or trading, we need a process. A methodology. All good methodologies have in common several traits beyond just a checklist. These are fundamental Read more [...]

Trading After A Market Correction

Mar 26th, 2015 | By | Category: Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
In the Spring of 2014 both the biotech sector and momentum stocks were hammered during an eight week period.  I have developed a set of criteria to identify when this sort of market correction has likely run its course. If you are able to develop a system to identify when a major market turn is close then you are more likely to capitalize on the very powerful moves that occur in the following weeks. In the two months following this bludgeoning there were some amazing risk/reward opportunities in market leading stocks such as NFLX, FB, TSLA, PCLN and LNKD. I created this lecture in August 2014 for our DNA Mentoring Program Read more [...]

Bad News–It’s Time To Buy

Jan 10th, 2015 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trading Lesson, Trading Theory
As a short term trader I scan the market each day for stocks that will be "In Play". These are stocks that have fresh catalysts which can lead either to a lot of people trying to enter or exit positions at the same time. If I can identify the best opportunities and the likelihood of a strong trend then at the end of the day my results should be pretty good. On January 8th GWPH announced that a drug they were testing failed to meet its "primary endpoint", which in biotech speak means the drug is no good and it is time to go back to the drawing board! When a stock has news like this it SHOULD go down. After the news was announced Read more [...]

Some Thoughts on 2014: Upside Volatility

Jan 12th, 2014 | By | Category: General Comments, Steven Spencer (Steve's) Blogs
The price action in 2012 presented a very compelling case for a strong market and low volatility in 2013 (see post on #NewNormal). It wasn’t the price action in isolation though. 2012 was in such stark contrast to the latter part of 2011 it really set off alarm bells in my head. We went from a period of massive volatility related to macro events to a period of suppressed volatility despite a constant stream of macro headline risk. So while many experienced traders and newbs alike (in my trading world) were making bets on the impending major market pull back, I continued to “preach” every morning on our desk that we should Read more [...]