In this video, Matt reviews a trade that he took in NIO, a Chinese electric vehicle manufacturer that is well-positioned to capture a sizeable chunk of the Chinese EV market.
View Video Transcripti’m matt crawford with smb capital and
today i’m going to go over with you a
playbook trade
made in neo an electric vehicle company
this trade involves looking at the
entire electric vehicle sector to see
how all the stocks are moving in tandem
to help give more conviction when
executing in a specific stock
such as neo so using the pre-market
technical levels
the intraday tape and the overall
sector’s movement
help gives greater conviction to make
opening drive long trade that i can’t
wait to share with all of you
[Music]
so like we said this will be an opening
drive playbook
in the electric vehicle um space
those haven’t been hot at all yeah they
haven’t been in play at all i don’t
what are those what are those stocks
we’ve been trading those every day
around the desk
tesla neo what’s that other crazy stock
we trade pdev
uh tesla neo xpev um
li yeah there’s a couple of them
so big reason these are such attractive
names as they
have elevated our ball usually two three
four times
um the amount than usual and then
on this particular day they had strong
pre-market ranges with a lot of volume
that you could really use
as uh pre-market risk levels
so you’d be able to enter when you see
these pre-market levels really hold on
the bid
and really reverse to the upside
let me just explain why you know
sometimes we don’t remember
like all of the symbols so our job is to
be moving around to the
stocks that are in play the stocks that
have elevated volume the stocks that are
really moving around and a lot of times
we sort of get caught
we’re not fundamental analysts that’s
not how we trade there’s a lot of
different ways to trade but the way that
we trade is
we find the stocks that are moving we
find the stocks with elevated volume
and a lot of times we have to sort of
learn a stock or sector on the fly or
pretty quickly or
may not even have the full picture and
price and volume is
is leading the way for us all right
killer matt
what do you got alrighty
so big reason on this day specifically
that we were trading electric vehicles
was we had a really large gap up in the
market
because heading into 2021 there’s a lot
of expected fiscal
monetary policy and then just the
positive market news and gap
up overall just evs have been really
intriguing in line with that
and then there’s just continued optimism
that the covet vaccine will be able to
be distributed throughout 2021
so that’s helping um
money flow back into the markets as
we’re seeing a lot of terms like
recovery rotation
and things like that with people trying
to get back involved and
search for where new profits could be on
the year and evs look like a really um
attractive space for trading profits i
think they’ve caught a bit a little bit
because of
biden winning and this the senate
turning democrat
the thought is they’re going to be more
sympathetic to
these energy plays these alternative
energy plays
and so that is another reason they’re
catching a bit
definitely if biden’s like build back
better plan really brings
back a lot or brings in a lot of new
energy jobs and a lot of
money into that sector that only boost
the electric vehicle companies higher
so looking on the day these were the
three main
uh electric vehicle companies i was
looking at nia was the one i executed in
however my other charts had tesla and li
on them as well
and a big thing to look at on this
screen is kind of comparing
the arvol on the day they’re short
floats and their institutional ownership
so you can see neo had the highest arvol
so this tells me
if i’m going to trade any of these that
it may potentially have the
largest chance of outsized moves which
is what we’re looking for
has a little bit higher of a short float
than the other two as well
which can uh lead to short squeezes and
then
also it does have a 36 institutional
ownership so you keep that in mind for
potentially how far something in trend
if funds need to really be
repositioning and in this one there can
be a lot more
um knee-jerk reactions and a lot more
movement price action because there
isn’t as high of an institutional
ownership really
weighing down the stock one way or the
other so
yeah just keeping an eye on the relative
volume in the whole sector
and kind of picking which one looks best
to you
based off a lot of those variables if
you want to learn
three more real world setups that our
traders use including the simple setup
that we teach
all of our new traders and the setup
that turned one of our traders into a
seven
figure big money earner check out the
free webinar that we’re currently
running
just go ahead and click the link that
should be appearing now
at the top right hand corner of your
screen that will open up the free
registration page in a new window so
don’t worry
you won’t lose this video you can also
visit
tradingworkshop.com to register for this
free intensive workshop
you’re going to learn more in a couple
of hours from this trading workshop
than from years of online education
so here’s neo and some of the technical
reasons why i also liked this trade
this 50 level had been resistance on the
daily
and we had finally been gapping kind of
above this level
as you can see here after prior month
month and a half
of basing below 50.
so you can see in the pre-market we had
this gap up over 50
consolidation underneath hold and then a
really
large push higher so
this is what we were looking at in the
free market when i came in
and i’m putting together my pre-market
plan i’m saying okay i see
this 50 area from the previous day
and then the pre-market was an area of
contention trading above and below
and then this 50-50 kind of top of the
range found some buying and volume
and then kind of topping out around this
5120 so i’m keeping these levels in mind
off the open
when we trade around them and how they
could possibly react
so we can just see again an intraday on
neo on the one minute but now i’m going
to show you the intraday
one minute chart of the other electric
vehicles you can see
how they’re similarly correlated on the
day and what’s looking stronger
so you can see this is a very clean
strong chart on neo
tesla very similarly held
its pre-market range tested the bottom
and then very strong open
so that’s another catalyst in your favor
li took a little bit longer to break out
but this one ended up looking almost
like the strongest on the day
as you can see just to clear up trend
after the buying on the open
and then the final one that was a little
bit choppier but did work its way higher
that we had on watch was xpev
so
so killer matt which one were you
trading and why are you watching all
these other stocks
right so i was trading neo because it
had the elevated
more elevated arvol clear pre-market
range levels
so why are you watching all these other
stocks like tesla and li
and xpev why not just watch neo
so something that i’ve learned trading
at the firm and trading with the guys is
that using
a basket of stocks to see how your idea
is playing out can be really pivotal in
getting stronger trade conviction
so if i’m watching neo and li and xpev
and i see off the open that not only neo
is getting some buying but
tesla is and li and if they’re all
getting bit up at those same times
then there might not just be an idea in
this stock but it might also be an idea
in the sector
so it might be a little bit of a sector
rotation if all the evs are getting
bought up
that’s going to give me a little more
conviction to maybe hold my trade longer
if tesla’s still really strong
or it’s going to give me more conviction
to get larger if i’m already seeing the
other
uh electric vehicle companies breaking
out and holding up
while the one i’m in is still basing
that might give me a little more
um conviction to get involved in the
stock there so
you can think of these other stocks as
like a check in your favor
essentially another another way to be
convicted about
if your idea for the stock and the
overall trend in the sector could be
correct on the day get long if the
others are strong
yeah there you go i like that it’s
definitely kind of what we’re we’re
thinking on a morning like this
the other thing we’re looking at is
we’re checking to see hey what’s the
arvol
in the other names in the sector as well
right so the other sectors or the other
stocks had elevated our ball but not
quite as much as neo
which was another reason neo was um my
top watch
so the tape is really going to be the
best way to see how this trade played
out
but here’s a chart of my trade
management so
we’re going to watch this 5120 level
look if i could just jump in here
it’s an excellent best practice an
excellent technique
if you’re trading a sector that’s in
play and we could swap out
the eb sector for the retail sector
or the marijuana names and you can do
the same thing
in other sectors when they get hot or
cloud computing okay or
the fang names and so
and this works this technique works
really
well when you have these sectors that
are that are really hot so
well done here setting this trade up for
yourself
thank you yeah so like i said we’re
going to open around this 5120 level
in the pre-market and we’re gonna just
see as the bids try and
give out they just keep getting uh
bought back up
and we just really hold the tape at this
50 80 area
so you can see um this bottom left chart
is the one minute of neo
with the times and sales in the bottom
center and then the top right i had
xpev which was another one of the evs
that we talked about and showed on the
day
and then on my other chart next to this
monitor or on my other monitor next to
the chart would be tesla
and the other ev names so i can watch
them all
in tandem so we’re going to start out
and break down to this 51 level which
you can see there’s some bids holding
there
it was trying to hold higher in the
pre-market and i’m thinking okay if this
opens at the top of its pre-market range
and can’t go right away it might need
some time to pull back and rest
and so we’re gonna watch these 51s get
decremented
i’m thinking okay this is going to be
weak
this should probably get some speed and
momentum to the downside and it looks
like it is a little bit here
but these 80 cents are kind of sticky in
a way you can see you get in the 70s
come right back to the 80s
now i’m seeing if they can bid it back
up again maybe get back over that 51
area where all those
um bids decremented i’m knowing that’s
still a big area of contention that 51
dollars now
you can see we’re really holding below
this this 51
so if we can get a good test below
these lows that clearly get bid back up
that would be a great
uh reason to get long so like if we make
a new low quickly gets bid back
up and then back to 51. that’s kind of
we’re going to see here we break these
80 cents finally pull down to the 50 70s
50 60s which we hadn’t seen before
then it just doesn’t break down not much
follow through
tapes holding these 80 cents again
buying going through on the tape
i get long in here kind of seeing his
upward momentum pulling up
picking up so i’m long at 50 90 risking
like
that low there 50 70 50 60.
and see it picks up pretty quickly in my
favor but i haven’t sold any yet because
we’re coming into the pre-market high
and for this type of setup to really
work
um we expect this to dip and rip up
through pre-market highs so i didn’t
take my first sales to like 5143
5160 just sold the sixth into the
the pre-market high saying if we do
reject there but
like i said still holding five sixth my
position
really or four-fifths my position really
looking for
the bigger move on this um keeping the
back of my mind this is a
three dollar atr so if this really
trends we can move up towards 54.
um we can see we have a lot of support
levels below now
to potentially more buyers come in the
volume on the morning is
very drastic with opening near 10 times
our ball
you can see um huge elevated up volume
there on the one minute
and now this is the spot in the trade
where you’re kind of in the driver’s
seat
and you’re just watching how the tape’s
stepping up when are we going to get a
change of
characteristics maybe some slowing to
take more profits
so we’re getting another extension and i
have some orders outs a little more in
front of 52
in case tape kind of slows into this
area just paying myself along the way
thinking there’s those offers at 52
stacked up so they’re trying to hold it
down there
so that’s a good reason to take another
little profit again when we saw those
offers stack of 52 and then
we don’t break right through are you
also watching those other stocks
while you’re watching the tape are you
peeking into hey how is
xpeb doing how is tesla doing how’s
li doing you sort of out of the corner
of your eye you’re
you’re peeking at them as you’re peeking
at the tape
exactly so xpev i was actually checking
out the tape live and
this 45 level was kind of its dip and
rip level
so when i was noticing getting long and
neo i noticed xpev was starting to dip
and then tesla was on my other monitor
and was
even stronger than the other two off the
open and barely pulled back
and was already moving to the upside so
seeing
buying an expeve already seeing strength
in tesla
and then seeing what i’m seeing in the
tape on neo
kind of all team came together to help
me get long in that moment
um for the reclaim of 51.
and move to the upside
so now skip ahead a little this is kind
of
sitting on half my shares now seeing if
we can get more breakout
as we do um
sold a little more into this extension
at 52.50
thinking we’re up about half an atr now
thinking always thinking about places to
add but right now
not really seeing any ad potentials this
is just
kind of going vertical so it’s gonna
need some time
gets its first pullback finally
and then this is definitely a crucial
area to see how this first pullback
after the opening drive holds
we want to see the strong up move and
then the pullback we want to see
a shallow pullback relative to the size
of the total move
so maybe if it just pulls back half the
move that’s that’s totally fine this was
a drastic breakout
and then we want to see lower volume in
this pullback consolidation
showing that there’s not as many people
really selling
and hitting it lower but more just
absorption
and consolidation
so you can see these 5190s 5180s are
really
just holding in this pullback
that would have been the spot to add i
didn’t um
but in review that’s always really good
to see how
it gets its first pullback it holds the
previous breakout area the tape slows
not much selling volume comes in and
then it quickly continues to the upside
as you can see it makes a new high
so that’s really good for me to note
when reviewing my tape okay
i had a great trade but how could i have
been bigger how could i have done better
and seeing
how the tape held that second time at 52
kind of like how it did for me near 51
i could have had conviction to get back
in in a portion of my shares there
and used it as a momentum lot into this
new high
into this 53 area which i knew it’s
probably where it’ll push
next due to technicals and then if we’re
going to make that full atr move it’s
probably going to break through 53
try towards 54.
so we can see how we push into these
highs
and just each time it’s making a new
high now after a consolidation i’m
selling some i’m down to
a sixth of my shares just kind of
watching
how this is trending
and then here is where i eventually get
out all of my shares
as we get a change of character in terms
of
we make a new high and then it quickly
rejects
and pulls back harsher than we’d seen
all day so
right in here so you can see 53.80
made a new high couldn’t really follow
through tried in the second minute
candle to hold up to go higher
and then we’re gonna pull back all the
way to the previous breakout area so
i’m down to only a tenth of my shares at
this point i take off more
at 53.37 and i have my very final
portion i take out there
53.20 when i see the tapes just really
giving out i’m expecting if we’re not
making a new high they’re gonna pull
back at least to 53
but we’ve almost had an eight full atr
move uh
a pullback to like v wap like 52 5250
could still be a strong stock but it’s
just not the game plan
i was looking to hold through and not
the risk reward i was planning for
so yeah so that’s how that trade really
played out for me
um found the slowing in the tape
alongside the slowing in the tape and
xpev
the strength in tesla and the other evs
knowing it’s a hot sector
and then just using the speed of the
tape and
changes in the movement of the tape as
reasons to portion out along the way and
and take profits
so this is what my trade execution chart
looked like
just to put it a little in in one place
to make it easier to analyze so
you can see that 50 80 was kind of the
low on the morning that was that area we
kept trying to break below and got right
bid back up to
then we got along we sold a little into
the pre-market high
sell more on new highs new highs
new highs fail and then tape
characteristics really change and we get
a drastic pullback after making a new
high and failing
kind of taking me out out there and this
is the area i highlighted where the ad
could have been
where we get this pullback and clear
hold over the breakout highs the
pre-market highs
and didn’t spend much time down there
either
so big thing to improve pretty much what
i talked about um
the pullback was very traditional in
terms of
what i look for and opening drive
continuations
um it had this nice pattern breakout
small dip little cup and handle
upwards um we saw the slowing in the
tape the volume was much lower in the
pullback
there were just a lot of things that
came together that could tell you there
was more upside potential in this
um and then the other big thing to
improve on is just um
in real time noticing how far
this trade could really go and trying to
hold longer before taking
the like second and third portions of my
profits like maybe
the cell here and here these could have
really just been held till this drastic
change of character
um knowing these evs have had such
outlandish moves and
i’ll remind you what the other evs
looked like on the day
which were also very strong expeve
li giving me really strong conviction
you can see after this based
and uh same with tesla so all these
looking very similar on the day and
which one you execute in is can be
preference based off the
stock price how it’s moving the
pre-market data
just based off your system but you can
still use all of them in conjunction
regardless
of which one you’re trading hey go ahead
and click our subscribe button so you
don’t miss any of the videos they were
producing for you
and the trading community and please
take the time to add your feedback
in the comments section for what videos
you’d like for us to produce next
and what you found helpful from this
video from all of us at smb
train and trade well
* no relevant positions
