If you missed this Webinar with Mike Bellafiore, author of the “trading classic” One Good Trade, Mike discussed the breakout on a high-beta stock at an important technical level. http://www.smbtraining.com/blog/the-playbook-webinar-series-the-technical-trade-in-high-beta-stocks Mike also discussed: How you can be more selective with your setups on high-beta stocks Risk management How to find important technical levels

1. High Beta Technical Setup
(Breakout Above Important
Technical Level)
Memo
AMZN
08/16/2012

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3. Big Picture
• SPY opens unchanged and after a selloff on the open it starts
trending higher for the rest of the day. The market is very strong and
closes at 142.
• This is basically a market trade using a high beta stock. Around 11
AM, SPY had put in its high and pulled back a little, very similar to
the AMZN price action. As the market broke out to new highs, AMZN
was set up very similarly embedding into a tight consolidation at the
highs. The simultaneous breakout confirms the entry and makes it a
very high probability setup/trade.

4. Market Trade
Simultaneous breakout in SPY and AMZN
Confirms trade

5. What are the important technical levels that
would make you take this trade?
-238.40 key breakout
level from earnings gap
up
-AMZN isn't a stock
where you can just pay
through a longer term
level without it showing
you something so wait
for an intraday level to
develop where you can
control your risk

6. System for scoring technical levels
- I'd rate the 10 day level of 538.40 as an 7.5 because it is formed from
a catalyst and later found resistance at this level a second time,
while it was ranging. As the price coils up below the level, the level
gains importance as the breakout will be more powerful through it
- I'd rate the the intraday level of $539 as a 9 because it clearly
showed itself as a big level where there was a lot of supply. Sellers
kept stepping down and not letting the stock trade above that area. It
also coincides to where the SPY stalled so a breakout in the SPY
and AMZN would be setting up for a significant move

7. Multiple Time Frame Technical
Analysis
• Above an important longer term technical
level
• Above an important intraday technical
level
• Market getting ready to break an important
technical level
• Powerful combination here

8. High Beta Stocks
• On a daily basis I have AAPL, AMZN, BIDU, LULU and NFLX on
my watchlist.
• If you pick your spots and put on the appropriate risk its not very
difficult. The mental aspect of risking 50c on a trade is challenging
but when you consider the Risk/Reward it makes it worth it.
• Other High Beta stocks that are more challenging because of the
higher price and spreads: GOOG, CMG, PCLN
• Develop a list of High Beta stocks and track them daily for
important technical levels

9. StockTwits 50 (stocktwits50.com)

10. Intraday Fundamentals
• There was no news in AMZN yesterday
• Strong market stock in a strong market breaking about of its range

11. Technical Analysis
-Compression on the 30day chart in a 10 point range
- Breakout of range with above avg volume

12. Reading the Tape
-This was not a tape play. Focus was on the intraday breakout. The first time at the level there
wasn't anything unusual about the tape but the second time it came back and it got through
the highs, there were a lot of buyers just paying the offer and stepping up the bid.

13. Technical Analysis
$ 239 Intraday inflexion point in AMZN

14. Trade Management - 1st attempt
Stopped out
Long 239.00
Stop 238.75

15. Trade Management - 2nd attempt
Long 239
Stop 238.80

16. Trade Management
Take sales into prev. highs
get lighter on Stop out of
Opportunity to
rebuy on the
remainder below
the break of
241
the intraday hold of 241,
Entry tight stop
trend

17. Trade Review
• I tried this trade the first time and got stopped out. The second trade
was even a better opportunity because at that point the probability of
it working out is much higher- as GMan always says.
• If I'm committing my time/capital to these trades, I can't take the first
setup and miss the second. The second trade was a layup trade.
• Too many new and developing traders miss the easier trade
because they got stopped out on the first.
• Trade the trade not your emotions.
• Do the right thing. Great example here.