SMB shares a ton of important price levels with its traders. Occasionally, we tweet these levels to the at large trading community as well. For a skilled intraday trader there is a lot of money to be made trading off of these levels. But without trading skills and an understanding of various trading setups these levels don’t offer much value.
I would like to discuss an important intraday level that we identifed in AAPL from Friday’s trading action. The level was 194.11 and we were able to use it a bunch of times the past two days. 194.11 acted as a key support level from 12:00pm to the Close on Friday. We highlighted this level as a good place to get long AAPL on the Open if it touched this price. Stocks that gap above prior afternoon’s support tend to bounce off of this level right on the Open.
Here is a list of the trades that were available at this key price point.
1) 9:39AM December 14th—long–trade worked quickly bouncing over one point
2) 9:57AM December 14th—long–stopped out for a 15 cent loss
3) 10:33AM December 14th—short on the pop to this level. trade works with a 75 cent down move
4) 10:52AM December 14th—short on the pop to this level. stopped out for a 10 cent loss
5) 10:57AM December 14th—long stock once it trades above 194.20 and fails to drop 194.11. beginning of 2+ point up move
With the exception of trade #5 all of the above trades were fairly easy to execute. But trade #5 offered the most upside. That is why trading skills are key in this profession. If you are unable to execute trade #5 you are giving up about 50% of the winning moves this key price point offered yesterday.
15 Comments on “Using Levels”
why wasn’t there a short when number two failed?
why wasn’t there a short when number two failed?
yo dude,
it was such a sharp down move that a safe entry point did not present itself by the time i exited my long position. whereas after trade 4 failed there was some brief consolidation and a pullback to 13 cents that gave us the long opportunity that was number 5.
steve
hallo steve,
I shorted aapl at 193.45.
the 193.50 was the previous day’s low. I made .55 cents on the trade.
do you the it was a good move to short the stock at that level after the sharp move down?
mark
hallo steve,
I shorted aapl at 193.45.
the 193.50 was the previous day’s low. I made .55 cents on the trade.
do you the it was a good move to short the stock at that level after the sharp move down?
mark
Hey Steve,
I get the stock at pretty decent prices but I can’t seem to capture the full upside in the stocks. I tend to sell early 20-30 cents in the money and miss out on the points. What advice can you give to help me achieve maximum value for all the hard work and proper preparation I put into these stocks? Thx.
Hey Steve,
I get the stock at pretty decent prices but I can’t seem to capture the full upside in the stocks. I tend to sell early 20-30 cents in the money and miss out on the points. What advice can you give to help me achieve maximum value for all the hard work and proper preparation I put into these stocks? Thx.
Hi Steve:
You stated, “Stocks that gap above prior afternoon’s support tend to bounce off of this level right on the Open”
Does this same principle hold true for the the Indexes and Stock Futures as well as equities?
Thanks
Hi Steve:
You stated, “Stocks that gap above prior afternoon’s support tend to bounce off of this level right on the Open”
Does this same principle hold true for the the Indexes and Stock Futures as well as equities?
Thanks
jacky,
the usual advice we give is to devlop visualization exercises to see yourself holding positions for the full move. i would also recommend a blog i wrote http://www.smbtraining.com/blog/why-inexperienced-traders-fail-to-hold-their-winners
that discuss this very issue.
steve
Steve,
Great advice on the blog.
You are right, the algo programs do the shake and bake on me. I recognize at least 4-5 common patterns but still can’t beat them.
Steve,
Great advice on the blog.
You are right, the algo programs do the shake and bake on me. I recognize at least 4-5 common patterns but still can’t beat them.
I have to disagree with 194.11 being a real level. If you look at that chart objectively, you’ll see that there is nothing special about that particular price. The previous day used it as supp on extremely low volume, but that’s it. When I look at the Dec 14 chart, I see 5 trades all focused around a price level that IMO has no real significance. Zoom out a bit more to the 10 and 30 min charts and you’ll see that 193.50 is a lot more significant level.
I have to disagree with 194.11 being a real level. If you look at that chart objectively, you’ll see that there is nothing special about that particular price. The previous day used it as supp on extremely low volume, but that’s it. When I look at the Dec 14 chart, I see 5 trades all focused around a price level that IMO has no real significance. Zoom out a bit more to the 10 and 30 min charts and you’ll see that 193.50 is a lot more significant level.
D Rob,
It is very important to consider the time frames of your trades when looking at charts. As an intraday trader I do look at 15 and 30 minute charts to establish a big picture framework. But then I will zoom in to the one minute to give me a picture of how a stock was behaving at particular price points intraday. However, trading is more than simply looking at the charts. At SMB we watch the tape in the stocks we are trading all day. In the case of AAPL 194.11 was a very tough spot to get hit on the bid all afternoon on Friday. Most likely because there was a buyer who considered 194 a good support area and simply was buying a little bit higher.
We then used this level the next day because large buyers will use similar levels to accumulate over the course of a few days. Ultimately, the validity of a level is determined if you can make money off of that price. In the case of AAPL there was a ton of money Monday from that price point. This was not after the fact analysis. This price point was shared in our AM Meeting on Monday and offered great opportunity right on the Open and then later in the day on the various trades I highlighted in the blog.
Spotting these levels is not the easiest thing for the novice trader. I have traded over 3,000 days in my career so price points that immediately click in my mind may not occur as easily to others
Steve