I was watching UA on the open and I wanted to write up this drive because I feel like I’m a bit more comfortable with the slower setups in a trending environment. On the open the timing windows are shorter, the price movements are more whippy, and at the moment it’s generally more difficult for me to control my risk confidently as a novice trader. The result is me not touching the keys until a trend play emerges after 10:00AM – 10:15AM. However, there are some fantastic opportunities that arise out of the open and if I’m going to be successful I need to develop the tools to trade it properly. With that in mind, I had a couple questions about the opening drive in UA today.
For the first 5 minutes after the open the volume in UA was surprisingly low before it picked up suddenly at 9:36AM. This was strange to me because I haven’t seen that volume pattern occur before. How frequently does this lull happen for In Play stocks? Also, does it indicate anything specific we can use?
With the market showing weakness, I waited for confirmation on the range breakout to the long side as opposed to trying to get long against the retest of 52.20 or the brief holding pattern above VWAP. I waited despite the recent strength of the stock and the presence of good news, and I was hoping to find a proper risk / reward opportunity with 53.93 (the all time high) as a target. Was this an appropriate judgment of the market or are the other factors contributing to my overall long bias enough to justify a more aggressive entry point here?
Last, is it reasonable to hold all the way through the 75 cent pullback after the steep move touching 53.93? I still had a long bias, but with the steepness of the pullback along with the weakness in the market I was having a hard time justifying holding on through the retracement.
1. Generally when there is going to be a good opening drive it happens right away. Right on the open. It is unusual for there to be a delay of 5-6 minutes.
2. I love your thinking about not buying until UA broke above the range because the market was very weak.
3. With an Opening Drive Play we do not let the stock trade back down against us. This is a subset of a Momentum Play. When the stock shows any weakness we exit and wait for the next set up. Stocks do not trend in the first 30 minutes. This is a period of price discovery. So just because UA had a sharp upmove close to the open does not mean it will follow through. There is danger that UA will return back to where it started or reverse. So you lock in the profit and wait for another excellent risk/reward set up.
I hope that helps. Keep working on your trading game!
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