![\"STJ](\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/07\/STJ-07-22-09.png\" "\\"STJ")
<\/p>\n","protected":false},"excerpt":{"rendered":"One of my absolute favorite plays is a stock that breaks down, comes back up to a great short price where a battle ensues and then breaks to the lows again.\u00a0 Today, STJ presented that opportunity.\u00a0 It had caught my eye in the morning because I generally like the way it trades on earnings, but when I typed it up before our morning meeting, there was no volume, so I wasn’t sure how good it was going to be.<\/p>\n
However, right before the open, a seller came down about 75 cents to 37.25 and sold a couple of thousand shares.\u00a0 This immediately caught my eye, and I decided to trade it.\u00a0 The stock opened around that 37.25 level and then traded down quickly to the whole.\u00a0 Because of the gap down, I decided to short with the seller.\u00a0 A little bit of support was found around 37, but when he finally dropped the stock traded down to 36 in about 2 minutes.<\/p>\n
Along the way down I was covering my short, and trying to figure out where to re-establish my short.\u00a0 The large gap down and the quick down move told me the stock was really weak, but on the way down I didn’t really see a level where there was a lot of volume done.\u00a0 Finally into the upmove, some volume occurred around the 60 level, and I decided this was my re-entry point.\u00a0 But then an interesting thing happened.<\/p>\n
36.50 started buying.\u00a0 And buying.\u00a0 And buying.\u00a0 Hundreds of\u00a0 thousands of shares.\u00a0 Then 60 started buying.\u00a0 Humongous prints going off.\u00a0 Hundreds of thousands of shares at a time.\u00a0 So once I saw the big prints step up, I got long.\u00a0 Then he stepped up to 70.\u00a0 Then to 80, then to 90.\u00a0 Talk about defending a position.\u00a0 There was a battle going on here.\u00a0 The buyer was actually printing huge blocks a few cents ABOVE the offer.\u00a0 At the moment, the buyer was winning.\u00a0 So I rode the long on the way up.\u00a0 At around 37, I thought the seller would try to make a play, but if the stock got above 37.25 I was going to begin playing aggressively long.<\/p>\n
But the plan was also to get short if the seller made a stand.\u00a0 The only thing driving the stock up was this one institutional buyer.\u00a0 Then, STJ couldn’t trade above 37.10, and when it got below the fig, it traded down to 36.75 really quickly before popping back up.\u00a0 Now I had a short bias.\u00a0 My plan was to be as aggressive as possible near the fig.\u00a0 And then the buyer came back and defended 90 cents, dropping a few times, but never printing below 85.\u00a0 I got out on the squeeze above the whole number, and set my alert for 88 cents.<\/p>\n
When I got back from lunch, STJ was right at that 85 level and dropped for the first time since the morning session.\u00a0 I got short and focused on holding a core.\u00a0 Below 36.50 the plan was to be very short, as the next stop was the low of the day, and then the recent lows of 35.80.\u00a0 I was also aware that below 36.50, this fund that bought millions of shares would be completely and totally wrong.\u00a0 I wussed out a little and didn’t hold as much size as I wanted, but I was able to hold a reasonable position for most of the down move.<\/p>\n
I definitely could have traded the setup better, but I was not only able to capitalize on my tape reading ability, but also I now have great levels for tomorrow.\u00a0 As a trader, you need to figure out what your best setups are, but also to capitalize on them when they present itself.\u00a0 I could have done a better job, but was pretty happy with the way I traded it, which is the second part of the battle.<\/p>\n
Levels I’ll be using in the stock tomorrow: 35.40, 35.75, 36.50, 37.25<\/p>\n
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