How to trade a SPAC with Tape Reading (3 prop traders reveal)

In this video, learn how to trade a SPAC, after a Bill Gates investment, with Tape Reading as revealed by 3 prop traders. Mike Bellafiore and 3 prop traders walk through in tick-by-tick detail how to trade the hottest SPAC in the market with tape reading. Let’s get to work on sharing these important trading lessons so you can grow your trading account.

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in this video learn how to trade a spac
with tape reading as revealed by three
prop traders hi i’m mike bellafiore
co-founder of smb capital
and we’re a proprietary trading firm
located in midtown manhattan
and i’m also the author of the trading
classic one good trade and the playbook
in this video
three prop traders and i walk through in
tick by tick detail
how to trade the hottest spec in the
market with tape reading let’s get to
work on sharing these important trading
lessons
so you can grow your trading account
we’re going to be going over a trade
today in a recent ipo spac
kcac and for those of you who are
unaware
a spac is a special purpose acquisition
company
they’ve been very hot for the past few
months
and essentially they raise money
through offering up equity in their
company and then use that money
to later on acquire a different company
that isn’t public
and then the two merge and that becomes
the company you’re really trading
these have been very very hot recently
and the only item in the market that’s
been hotter than specs
has been electric vehicle companies and
here we have a trade
where a recent spec ipo kcac
has announced that the company they’re
acquiring is an
ev company led by bill gates
so this is huge news and it’s easily the
biggest day
in the company’s short history in the
pre-market
we’ve already traded more volume than
the total amount of volume traded before
today
in all days combined so we go up from
what was i think around ten dollars
closed the previous day to over 16
in the pre-market and you can see that
going into the open
we’re consolidating between this 1550
and 16 50 1625 area
area range for those of us watching it
in the pre-market
we’ve realized that 1550 is an area that
has been defended
with very very large bid size twice
and that’s something to keep looking for
off the open
yeah and so we couldn’t get an exact
share count but the float is somewhere
around 20 million so this is going to
trade like a bit of a low float
and so at least for me in general i have
two
strategies that i’m using for logs for
the front side of these low code names
and one of them is going to involve on
the open facing
low floating gapping up significantly
and unable to trade
significantly lower even on elevated
volume
so we’re going to see that here and
we’re going to kind of talk about how we
go about
taking advantage of that strategy so
even before the open we get this push to
pre-market highs so
going to be seeing i’m not going to be
touching it directly off the open buying
the opening
or anything like that we’re just going
to be seeing how this trades as we open
up
we’re open now there’s going to be a
stuck print here at 16.
try to ignore that
it’s now just watching seeing what
levels are going to be important here
for right now holding up reasonably well
um looks like the 16 may be a bit of a
battleground
but again doing reasonable volume and
not really able to trade lower so i hit
in long
fairly soon here once this dip gets
bought up
now we get in i finished i just fell in
a small position at 16 expecting this to
work immediately
so we don’t really have that follow
through to the upside so if something
strange happens here
i’m trying to exit my position
and i think for this two gram is like we
we tried this a couple times
on uh and we were talking through this
on chat i’m just see if we did hold that
16.
but we were in like our tier one size
exactly and so i have more shares
borrowed here this isn’t the full size
i’ll be trying to do it sometimes you’ll
have to take more than one
shot at this but seeing that we’re not
getting that follow through right now i
think we’re gonna need more time
hey guys how do you feel about trying to
enter around
1575-ish with a stop below 1550
since it’s holding up pretty well one
issue
i that comes to mind with that is that
you know the stop is going to be a
decent bit wider and if this thing does
end up actually going we probably won’t
see 1575 again
now we do actually see this in this
trade later on and we do take that trade
you’re you’re talking about
um but i i just wanted to have some size
on so that i’m at least getting
uh one tier into the trade before it
rips without me if that does happen
yeah well i agree with that too uh 1575
was the technical level we were watching
um but just go on along with graham you
know in case we did
you know retrace near that 1575 level
and we did gap and go
that was something we were aware as well
so we were trying to be
more careful with our size and that’s
what we were trying to do like a tier
one entry
but yeah definitely agree with that 1575
level is a key inflection point
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so really if this is going to work out
now like it should have gone by now
so once 1590 the leap gives out
i’m out of my trying to get out of my
position but end up having a bit of an
issue that i’ve never had before with
the ecn arca is not filling me
on the on the sell side here for
whatever reason i’ve never had that
happen so it takes me a little bit
before i actually switch over to edgex
and get out of my position but you see
i’m getting rejected all my
my shares right now
so a bit of a special case here i
haven’t had this problem since
one thing we’re looking for here too is
how we’re gonna hold up
against 1550 and if on our level two
we’re seeing
any kind of bids step up and
you’ll be able to see in this next
minute here that the selling that
happens for
the first two three minutes of the day
just comes to a grinding hall
yeah sure and you see even though we
broke below that 1575 previous wick low
we didn’t get any real continuation so
now just looking to get in for a better
price again looking at this 1570 area
for now seeing if that’s going to be the
level
i don’t believe i try it one more time
but again even the volume we’re trading
now isn’t too significant it’s really no
different than what we were trading in
the pre-market the sellers aren’t really
stepping in to take this one lower
so even though i’ve taken a hit on it i
still am pretty
pretty much liking the idea
so i’m in again risking a real move
below 1570
and we end up getting that and when that
does happen especially in these low
quote names
even though this is an s pack so it
trades a little differently you do want
to be out quickly you don’t want to try
and give it any wiggle room because
these do have the potential to really
drop out if you’re not careful
have to be very careful of risk
management in these trades
we’re not getting the volume that we
thought we were going to see here at
this 1575 level it was holding up but we
just couldn’t get that continuation
so we drop out there
again no real continuation to the
downside though
so you know i like to say with these low
float opening
consolidation setups that i take on the
one side even though we’re selling off
some i do view this as
quite bullish because we’re not falling
off as much as we should be
well we see new lows there and we
eventually drop out quicker than we have
all day
touch 1550
and you’ll see that it immediately gets
bit up exactly
that’s where i got very long
yep and so at this point you know this
could go one of two ways
really this could re-bid very quickly
like it does here or it just continues
and this turns into an all-day fader
all the chance in the world that happens
but the tape gives us the confirmation
that i need to take one more try at this
trade
and once we see this rebid uh it’s
you know it’s game on and i feel quite
comfortable with the yeah and so when
you see that rebid
you’re thinking hey let me buy this
against a little bit below 15.50
and see if we can catch a run exactly
at least for me i end up getting like
1580 or something here
and i have a hard stop i’ll have a hard
stop at 15 49 but then if this thing
just holds down below
1570 i’m gonna be out of the position if
we sustain down there
uh this should kind of rubber band and
snap to the upside pretty quickly
yeah what price did you get 1580 yeah
i’ll get it in a couple seconds here
just something to think about for that
so that’s a
a bit far away from the mid 50s
you know so you probably ideally wanted
to get in around 15
somewhere in the 1550s if you have to
pay 1580 like that it’s
pretty far away from where you want it
to enter so one of the things that you
can do
is all right i’ll buy a little bit at
1580 but but bid for some
at 71 cents 66 cents 61 cents
and then have all of that
against below 50 cents and just try and
make the spread
on some of those other tiers so that you
can improve your price from 1580. a bit
of an advanced
a bit of an advanced
trading technique but when you get in at
a bad price
and you’re pretty confident that the
overall idea
could work and you have a very clear
area where you would be wrong
bid for better prices
and then make the spread on those better
prices
improving your overall price and then go
from there does that make sense
yeah absolutely it’s not something i’m
implementing right now just because it
feels tricky but it’s definitely
something i need to be working on if i
want to
take my trading set up to the next level
100 so like i do something just as
simple as
all right i get some at 81 cents i bid
for some
at 71 cents i get hit at 71 cents i try
and kick it out at 84 cents i bid for
some at 66 cents try and kick it out at
79 cents
if i get hit at 61 cents i’m not going
to
try and do anything with that i’m just
going to add to my core position from
from those prices
so great prices i’m just adding to my
core other prices i’m literally kicking
it out
and making the spread so that my 80
cents on tier 1 really becomes like
60 cents or something like that another
thing to
i want to keep in mind is that you know
when i’m thinking about price targets
for what i view as a short squeeze trade
really
my my thought is that most of my shares
should be getting ditched if this works
well
above 1660 so i’m a little bit more
comfortable putting on some shares at 80
cents
but obviously the better your price can
be the more shares you can actually
build into that position
just the better the rr will be i’ll
continue
again i’m just looking to make sure that
we’re sustaining at these prices but now
that we’re really holding up
i believe i get in quite quickly
one more wash and then once we walk it
back up i’ll be hitting the offers
and so now we push above 1590 and it
looks like this is working properly
properly we’re back above that 16 level
so things are looking good for now
and here’s where i enter my uh tier two
it’s trying to break above the opening
or that 16-2 level
and you see i offer summit 1633 there
which may be a little bit early it’s
only a quarter of my position
i’m just taking some up before the
actual high of day in case we do get
that stuff
and then put some other orders for the
actual short squeeze move above
so if we do squeeze above 1641 hopefully
i can get
filled up here in the 1660s
and then holding the rest to see if we
can really squeeze higher towards 17.
so i will say given how long we
consolidate here
i would expect those to squeeze through
highs quicker
and this ends up giving us more of a
fight than i was really expecting or
looking for
generally these fall through to the
upside like i said like a rubber band
fairly quickly
so this does concern me that it’s taking
this one but there we go
straight through
and i get filled for half my position
i’m out now and looking to see how the
latter half will play out yeah when i
see a move like that guys
i’m gonna bid 26 cents 16 cents 11 cents
just in case somebody wants to make a
mistake and hit me on the bid
you know we’re above the intraday
resistance levels
it’s made a new high it’s showing us
we don’t know where the top is yet
and so i i want to add more and i’m just
going to try and add more at a better
price
yeah you know so when something makes
that new high
i’m going to bid at a price that i think
is pretty advantageous
to add to my position
and you have to do that like you have to
do that instinctively you might sit
there and say well i’m never really
going to get it you’re going to get it
sometimes particularly in something
that has a low float particularly in
something that just moved
that violently to the upside
particularly when it’s that early in the
morning
so you want to you have to get into the
habit of you know i’m going to bid
26 when it makes that new high i’m
bidding 26 16s 11s
and doing that all the time and i feel
like that’s somewhere i could definitely
improve is
using technology just hotkeys to be able
to be quick sending in those orders
that’s usually my
my issue with that is trying to do it
too much manually setting these orders
20 cents below hoping that i can get
filled so that’s something i need to be
working on on the
technology side
and so as we go up i’m scaling out as
well
and down to a quarter of my position and
now that the short squeeze has really
happened and confirmed
i’m not looking to swing this idea
instead i’m looking to see
are we going to go limit up and you see
that above 17 we actually start stalling
and we can’t really go limit up so
pretty quickly i end up getting out of
my final shares
because if this is going to follow
through and go limit up it it should
happen
immediately it shouldn’t be taking this
long consolidating
i believe this is where the tape really
changes to the 17 level and you see i
just got out of my last shares at 17.
we just went so vertically that it seems
like we may need to
have some relief to the downside if
we’re going to go any higher
so that’s important for these trades is
just trying to engage that momentum and
where it’s starting to turn around
in these short squeezes not overstaying
your welcome in your position
and ty i believe you were flat here as
well yes
yeah when you see something vertical
like that you want to pay attention to
how they’re paying the offer
and notice when they stop paying the
offers aggressively and when they stop
doing that
take some take some risk off the table
in above 17 there wasn’t
like a continuation in volume and so we
were really watching above those levels
and and you can even see here with this
indicator we have on the level two
i mean on the squeeze bar almost all the
volume being done on the offer
on this turnaround bar above 17 almost
all the volume being done in the bid as
all the longs are
getting out of their positions and we
saw that in piton today on the open
right
we noticed the way they were paying the
offer paying the offer paying the offer
and they just stopped paying the offer
at a particular price and that happened
to be
a shorter term resistance area
super important to take a look at how
they’re paying the offers
on the tape and noticing when they stop
so we can let this play out a little bit
this
ends up actually being the top and it
sells off from here
so i didn’t get involved for anymore
um i tend to think that i i don’t want
to get short for
names like this right now i struggle
with the risk reward of the trades
but something i’m looking into for the
future i know matt took advantage of
this
and there we just see 16 8 break
yeah and we haven’t seen a dropout like
this in the name all day
our thought process here is like we’re
above the pre-market highs and all-time
highs so we want to see
you know find a direction where this
could really run to
more just sitting on our hands at this
point yeah and so i i don’t
by any means think that the play is over
and that this thing is just going to
fade the rest of the day
but i am thinking if i’m going to get
along this thing again i want to see
some consolidation
you know above these opening prints i
wanted to show me that it still has
strength and
stop showing downside i do think you
have a trade decision there
particularly around that 30 cents 26
area
you know when it pulls into like 16 26
16
30 to just dip your toes into the water
and by a little bit and then really wait
for the turn
to potentially head back i mean it’s
entirely possible that
because it’s so early in the day it’s
entirely possible that
this thing stalls out and and isn’t
going to trend for the day
but you know we did just see this above
17
near 1725 and it just pulled in a point
in a stock that’s above
the opening range and so
you may want to think about for your
trading strategy dipping your toes in
there
into a really
steep decline
and adding that to your strategy the
best strategy is you see a turn and you
save most of your risk for that
but i would have been pretty tempted to
buy a little bit there
right right on the bid of 26 cents
anyway
so i’ll just fast forward this we end up
not seeing much life in it for a little
while
uh you know the tape just keeps rolling
over
we fade all the way back down to this
1550 area
where for a minute it’s also a view up
and for a minute it looks like this
might be defended
but once we flush through there that’s
it for
the rest of the day pretty much and
that’s why
you dip your toes in and you wait for
the real turn
as opposed to just really buying a ton
based on price
um but yeah that’s that’s essentially it
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