Trading A Secondary Level

sspencerSteven Spencer (Steve's) Blogs, Technical Plays, Trading Theory14 Comments

JPM priced a secondary a couple of days ago at $35.25.  JPM showed nice strength in the morning and traded up from around $34.40 to $35.25.  One of the younger traders on the desk called out “JPM at the high of the day”.  Rosie, the trainee who sits to my left immediately responded that JPM was approaching its secondary price of $35.25 and to be careful about getting long.  She actually seemed like she was somewhat annoyed that this young trader was either unaware that JPM was approaching such a key resistance level or did not share this VERY important information.

The secondary price is significant because many investors are long at this price.  In the case of JPM over 100 million shares were sold to the public at $35.25.  If a stock trades below its secondary price then it may become a huge resistance level as many investors are happy to sell there positions at a break even price.  Also, many market players are aware of this group think and will use the secondary level to short stock as well.

It was a good job by Rosie sharing this information with the desk.  Traders were able to factor this into their decisions on how to trade JPM.  Many of our traders myself included established short positions in front of the 35.25 level.  We covered when it pulled back to 35.  35 was also a key level in JPM two days ago as it offerred afternoon resistance on Tuesday.  So each time JPM traded down to 35 and found support I would get long.  I made about six trades in this range.  Five of Six trades were profitable.  I got stopped out of my final long when the 34.94 bid dropped.

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jpm-3525-level

14 Comments on “Trading A Secondary Level”

  1. Do you guys look at hourly charts, daily charts etc.? What about technical indicators like MACD, RSI, stochastics?

    I actually like how simple your charts are. It is all about price, support/resistance, and volume.

  2. Do you guys look at hourly charts, daily charts etc.? What about technical indicators like MACD, RSI, stochastics?

    I actually like how simple your charts are. It is all about price, support/resistance, and volume.

  3. Do you guys look at hourly charts, daily charts etc.? What about technical indicators like MACD, RSI, stochastics?

    I actually like how simple your charts are. It is all about price, support/resistance, and volume.

  4. This is an excellent intermediate/advanced trading lesson. Thanks!

    As a follow up, I would love to hear more about where you choose to enter on a “pullback to support.” In the case above, JPM dipped below support each time, so did you enter when support was reclaimed on the thesis that there was not enough selling to stay below 35? Or, do you use a different strategy?

    Thanks for the excellent education!

    Damien

  5. This is an excellent intermediate/advanced trading lesson. Thanks!

    As a follow up, I would love to hear more about where you choose to enter on a “pullback to support.” In the case above, JPM dipped below support each time, so did you enter when support was reclaimed on the thesis that there was not enough selling to stay below 35? Or, do you use a different strategy?

    Thanks for the excellent education!

    Damien

  6. This is an excellent intermediate/advanced trading lesson. Thanks!

    As a follow up, I would love to hear more about where you choose to enter on a “pullback to support.” In the case above, JPM dipped below support each time, so did you enter when support was reclaimed on the thesis that there was not enough selling to stay below 35? Or, do you use a different strategy?

    Thanks for the excellent education!

    Damien

  7. What charting vendor is this you have been posting on the blog lately such as in this JPM post. I noticed a switch from the old Prophet Java charts (Which i absolutely hate).

  8. What charting vendor is this you have been posting on the blog lately such as in this JPM post. I noticed a switch from the old Prophet Java charts (Which i absolutely hate).

  9. What charting vendor is this you have been posting on the blog lately such as in this JPM post. I noticed a switch from the old Prophet Java charts (Which i absolutely hate).

  10. Damien,

    I was using a combination of tape reading and technicals on the long side of the JPM trade.

    The first time it pulled back I bought at 35 and got out when the support dropped. I noticed buying at the 35 level and reentered my position.

    The second and third times I bought below the 35 level and added to my position when it held above.

    I agree with your thesis that there was never enough selling to hold an offer below 35. That is why I was “technically” buying below support which a novice trader should never do.

  11. Frank,

    When I blog from home I use Prophet most of the time because I don’t have access to our proprietary charts we use on the desk.

    I actually like prophet charts but I guess to each his own 🙂

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