One of the hardest emotions for people to deal with is regret. We all know we can’t go back in time so sometimes this regret will lead to poor trading decisions in the present. What if you had a system in place to deal with this problem? And what if that system allowed you to capture large moves in the most volatile stocks? I can offer a solution to both of those things in this video.
View Video Transcriptone of the hardest emotions for people
to deal with is regret we all know we
can’t go back in time so sometimes this
regret will lead to poor trading
decisions in the present what if you had
a system in place to deal with this
problem and what if that system allowed
you to capture large moves in the most
volatile stocks I can offer you a
solution to both of those things if
you’re interested stick around for this
video
[Music]
I’m Steve Spencer I’m a partner at SMB
Capital proprietary trading firm in New
York City where we trade stocks futures
and options at least once a week I hear
from someone who tells me about their
regret of missing a move in Tesla I get
it it’s tough you were watching a stock
or you were long a stock from a good
price and didn’t take advantage of the
opportunity
I decided recently to share an idea for
buying Tesla if it had a pullback here
is that tweet this is one of several
techniques that I will use to buy a
strong stock on a pullback
the technique that I used here in this
example is finding a previous high where
the stock get pulled back from I also
drew a trend line on the 30-minute chart
going back several weeks capturing the
breakout form 430 you can see pretty
clearly there there already have been
two boback’s when Tesla moved up quickly
from the trend the most recent pullback
was from 540 to 500 buyers stepped in at
500 and resumed the uptrend the uptrend
actually accelerated when it got above
540 so that two days later it was
topping out almost at $600
this had the feel of some funds with
larger positions covering their
positions that tweet was Thursday
morning the market gave us a gift Monday
morning we were gapping lower because of
fear related to the spread of the carnal
virus because Tesla is such a volatile
stock it will almost always gap
significantly lower when the broader
market has a large overnight gap here
was the follow-up tweet from Monday
morning about an hour before the market
opened so let’s look at a chart actually
from the day of the second tweet when
Tesla was trading down to 540 in the pre
market as you can see I have marked a
couple of areas in the pre market where
their buyer stepped in at 5:40 also I’ve
labeled points one through four so when
we’re thinking about this this set up
but the interesting thing about it the
great thing about it is bigger picture
this is a stock that’s extremely strong
it’s probably one of the five strongest
stocks in the market right now it’s it’s
a stock that many people have missed
they didn’t buy it when it gapped up
from earnings at 300 they didn’t buy the
breakout about 430 they missed the move
above 500 but in a strong stock that has
upside momentum pretty much it’s never
too late to look to buy into a pullback
to a recent breakout area and that’s
what we had here the other good thing
about it is and we’re talking about in
the morning meeting
we have traders we’re gonna be looking
at this in trying just to capture move
from 5:40 maybe back up to 550 as an
intraday scalp we have other Creators
we’re trying to capture the pullback to
540 we may want to capture a swing
position back up to 560 or 570 we have
other people who think that this is in
an uptrend if I can cope by it on the
pullback to 540 and it closes above 550
perhaps I’m going to hold this until the
longer term uptrend on the daily chart
is broken so this is a setup that can be
used pretty much on any timeframe that
you’re trading and what we’re doing here
by zooming in on the intraday chart to
the open is talking about techniques
that we use on our desk on a regular
basis to enter into some of the
strongest stocks the stocks that are
moment’ have momentum to the upside and
that have significant upside because of
kind of the nature of the of these
things so looking at the chart we see
points 2 3 & 4 one thing that we would
like to see is when it’s coming into our
area that 540 air is the area that we’ve
identified
it’s the prior breakout area the
30-minute uptrend that we showed you on
that second tweet that I put sent out at
8:30 in the morning that show that the
uptrend that actually caught up to that
area but one thing that we would like to
do we want to gets long something that’s
pulling back on the lower timeframe even
though it’s in a higher time frame
uptrend
we want to see it bounce from that area
and the reason we want to see that is
the reason that technical analysis works
and I’ll do another video on this in the
near future is because people are
looking
there’s supplier demand at the prices
that you’re looking at and so my
expectation is that there’s going to be
demand at 5:44 this stock when it pulls
back because it’s in a strong uptrend
and people are looking at the same
charts that I am
funds are looking at the same charts and
they when they see a pullback to 540
they’re gonna use this as an opportunity
to get along so the first sign that this
might be right is in the pre-market I’ve
circled two areas it’s already been
bought at 5:40 twice in the pre-market
so people are looking at that area
already our next point of confirmation
is when the market opens and the volume
goes up significantly what happens and
so generally when in a bout scenario
like this one of two things will happen
we’ll get a quick flush on the open
below the potential support area but in
the next five or ten minutes after the
market open it’ll be back above and will
continue higher or right on the open it
just will go
it’ll just from will go from 540 to 545
or 550 and once it does that we know
that and we see a heavy volume right
there a big volume spike right in the
open that people are looking to buy this
there’s significant buyers coming in on
the open with heavy volume and so that
brings us to point number two point
number two is at 5:45 and the reason why
I chose that as a potential spot to get
long if you get low around in the open
is the initial drive took us up to 550
it pulled back very quickly to 545 it
quite a bid and then went to 552 so I
know you have to the initial opening
drive the pullback low is what we call
that was 5:45 so half hour later when it
pulls back to that 5:45 that’s a spot
where you can have a bid your risk is
about a dollar there and when you’re
looking for is it for it to move back up
to 550 hold higher and then continue to
trend up in this case you can see it
bounce from 545 but it failed actually
at 550 and potentially if that was your
trade you were taking there you would
have been stopped out when it got below
544 now some traders who are looking
from a bigger picture perspective might
just use that pullback to buy 545 sell
half at 550 and then move the stop down
below the low of the day and so they’re
still in for half the position point
number three is actually a technique
that I would use I think it’s less
common but I wanted to bring this this
point up to you which is as it moves
below 545 and starts to get closer to
540 I’m going to look to see on the tape
if it starts to move sideways and we did
actually see that at 542 the
pull back low from 550 after between 2 &
3 was 542 it popped up a little bit they
couldn’t get back about 45 but it came
back down a 542 again and it held there
again
so I’m looking I’m not going all in full
position at that point but I’m gonna
enable if I see buyers on the tape
they’re 542 and I’m going to I’m gonna
use that to start to build the position
if it pulls in more closer to the 540
level
I’ll just get bigger or if it starts to
move back up above 545 and starts to
hold above there that would be point
number 4 where where people would
potentially be looking it’s back above
the pre-market resistance it’s now all
ready to break the intraday downtrend
pullback trend and it’s also starting to
hold above you up that would be point
number 4 and then eventually once you’re
in from point number 4 I think
eventually this ended up creating back
up to 560 or 565 or something like that
but the point is you want to have
multiple ways where you can get involved
when it has this pullback has this
pullback from 5 I think it was 595 was
the top around there or so and the 5 90s
load may be too low tonight 5 90s when
it comes back down here you one of these
techniques where you can get in when the
trade starts to work you can stick with
it for from for a much more drip or drew
moved to the upside and remember this is
you know this is this was on Monday they
reported after the hours they reported
after the clothes on Wednesday so by
Wednesday midday the stock had gotten
back up to around 585 or so so it
bounced 45 dollars and most traders
would take it off at that point not
taking the earnings risk into the trade
so I want to give you a second example
but before we get into the second
example of what is probably one another
one of the top 5 stocks in the market I
want to let you know that all the
traders that we hire for our desk are
required to go through an intensive
mentoring program prior to their start
we call it the DNA program we actually
are running a two-hour free workshop
where we teach the core topic from this
mentoring program it’s how to identify
the best restored stocks to trade each
day in addition to that technique we
also teach you 3 of the trees that we
use on our desk the lowest risk highest
reward trades
and you can understand our process
better and learn some more about the
mentoring program that all the traders
that we hire for our desks go through as
well if you’re interested click on the
link above or go to training workshop
comm all right so let’s take a look at
the second example of a very strong
market leader this example is actually
one that I had missed a huge move in
early 2019 the ticker is shop SH Opie we
came up with a plan on how we would
treat it if it came back down to our buy
area with options it’s a momentum stock
similar to Tesla in fact on a percentage
basis it’s up a lot more than Tesla
since the beginning of 2019 so let’s
take a look at the chart so you can see
in the early 2019 this was a $200 stock
and it actually consolidated between
March and April and it broke out in
April very slowly and then in May I
guess that was probably an earnings
report it broke out from 240 and started
this big uptrend we’re looking at a
daily chart right now so I missed it I
wasn’t involved this is kind of the
opposite of Tesla where I’d been in from
like the lower 200 so this one ran from
200 to 280 I missed it
I think people I don’t recall I don’t
think I was even in the bun the bloat
the breakout above 280 we saw it go from
280 to 330 and basically what we had
said was let’s let’s make sure that we
don’t miss this if it pulls back to the
uptrend on the daily and so you can see
it had a red day where it went down to
315 the next day had gapped down to 310
and we had a plan that basically if it
came back into the low to eighties we
would test sell the 275 puts and maybe
was the 270’s this is a while ago and we
would buy the 300 calls but the
technique that we were using there is it
really it’s a great technique to kind of
take advantage of increasing volatility
when a stock pulls back like this from
3:30 very quickly into the two eighties
the punts increase very quickly in value
so if we sell the 275 to the 275 puts
that basically creates an artificial
long meaning that if the stock created
down into the two 60s
we’d be long the stock if it doesn’t
trade down there we collect the premium
for the puts that we sold and at the
same time if it
is back up to 300 we brought the 300
calls which will increase in value the
way that we trade this typically is we
got really lucky on this one in the
sense that it came to the uptrend line
it never went below 280 the next day at
start at the bounce when it got back up
to 300 or 298 we what we’ll do is well
short 25% of the call position so that
way if it rolls over back down if the
two EDS will make money in the short
position and it’ll cover the cost of the
calls that we bought the 300 calls in
this case eventually just eventually
trended back up to the high we we got we
got flat until I think 320 or 325 or
something like that so the great thing
about something like this is in a really
strong stock when you move out into
further in time what you’ll see is you
can see we pulled back there it traded
up to 330 it pulled back I think to
pulled back to about 310 or so
eventually went higher but a few months
later what happened again it came back
down at 280 so we put the trade on again
and then on the third time we put it on
again and so we’ll once we have an area
that we’re a stock as there’s
significant pounce and the reason why I
want to share this even longer timeframe
chart with you in chop is you can see
that initial trend where we got in on
eventually it broke to the upside and
made a new high and I think it went up
to about 380 or $400 it’s the pullback
treed the second time it’s a different
trade right because it’s not it’s not in
an uptrend any longer but what we know
is when it put in its its all-time high
there at 3:30 or 335 or whatever it is
towards the left side of the chart and
we bought a QED didn’t actually meet a
new all-time high and went to $400 and
so the trade when it comes back the
second time in september/october is a
couple of things number one so we always
want to buy in areas horizontal support
areas where we have broke out from and
pulled back and they meet new all-time
highs it also when a stock when a
momentum stock runs up like this to four
hundred one of the most common areas
where people will look to buy it on a
longer term pullback is a 30% pullback
from the high and what is 30% pullback
from 400 that is QED it also lines up
with the 280 where we bought
in June so that was a great spot we
bought it again we got flat when it
bounced back into the three 20s the
third time was a little bit dicey er the
reason was a little bit dicey is you can
actually see a downtrend is starting to
form and so we did it again we took the
crate again because we’re in a bull
market and things you know the market is
still very strong but it was the
riskiest trade of the three but at the
same time we went to the well again it
worked again and it actually led to it
making a new all-time high and now as
I’m talking about this tag I think it’s
like a 470 or 484 76 today and so this
is a technique this is like a great stem
in the stock went from 200 to 330 went
up 60% we were still able to buy it into
a pullback in an area where were lists
where our risk was basically 1 to 2% the
stock ended up running up in the near
term 10% very quickly over the medium
term about 40% or so about 40% and then
in the long term another 50% and so it’s
the same technique and whether it’s shop
whether it’s Tesla whether it’s Netflix
and you’ll notice my charts don’t have
moving averages Fibonacci’s or Bollinger
Bands or other technical lines I’m
relying on what is called horizontal
support and resistance this really is
the most important thing you can learn
about supply demand and short term
trading and by the way at the bottom of
the video if you’ve been trading these
market leaders these momentum stocks
kind of tell us the techniques you’re
using to get long on the pull backs tell
us this how you’re using these setups if
you have questions about this particular
setup more details or if you have an
entirely new idea for a video that you
thought of just from watching this video
or something you’ve been wanting us to
answer please put it in the comments
section we all learn more from your
questions and from your comments from
each other so it’s not just about
learning from us we learn from each
other
