Bigger picture: XLF and VIX
Just like SPY and Q’s, XLF has
broken down the 50SMA. But
it outperformed a little
intraday because it managed
to close green. Like most ETF’s
it was a small range day.
VIX level : 20
VIX has reclaimed the 20
threshold. It’s a market where
traders should/can focus
more on market plays.
There’s a catalyst, usually negative, that has caused a large gap down. The thesis is that the market
has overreacted, and the stock has sold of too much. The stock will bounce and have an intraday
trend. It can become a trend day, but I think this is less likely. It can also turn into a failed gap down
bounce day and have a bearish trend.
-Large gap% and ATR: <gap>% / -<ATR>ATR
-Preferably a HTF support level: <price>
- Strong intraday price action that confirms thesis.
Playbook examples: LULU, ILMN and DFS.
-Opening range breakout.
Anti playbook trades:
VWAP Pull In.
Gap down (bounce) day is not a setup that goes along with the VWAP pull in trade. I am going long
on a stock that is down. When I trade that, I want there to be strength and an intraday trend. If we
have strength and pull back into VWAP, then almost always we have broken the intraday trend.
Getting in at VWAP and anticipating a new trend instead of joining it, doesn’t have high odds and
these setups with a gap down and negative catalyst.
Gameplan/ 5 step’s/checklists
1) Premarket game plan.
2) Prioritize and deep dive
Identified this correctly as a gap down bounce day setup, compared it with
LULU and ILMN. This is a strong setup because the catalyst was positive AND
there was an important HTF level. I had high conviction in this setup. I should
do a better job grading the potential of the setup. Would be the first cue for
a potential big move. Next time I’ll compare it with current playbook setups.
3) Analyze intraday price action.
Room to trend on the intraday was questionable, I thought. The opening
range breakout already made a 2ATR move which made me a little hesitant.
But the biggest movers are those who have already made big moves! We
don’t have an open of 0.8ATR and then trend towards 2.8ATR. I want to work
on a system to grade the setups next time.
4) Structuring the trade.
Didn’t do a proper job here. Wasn’t completely sure why this was a
trade2hold. The setup, elevated volume and intraday price action were
5) Rate the trade pattern.
I went through the variables in my head which is enough for the wedge
pattern. It’s an easy pattern to spot.
Potential to go higher/lower DFS
Holding above/below key level? Yes
Strong/weak market (bigger picture)? Medium
Strong/ weak market intraday? Yes
Strong/weak fundamental catalyst? Yes
Strong/weak setup? Yes
Elevated RVOL? Yes
Room to trend on daily? Yes
Room to trend intraday? Yes
Catalyst: Earnings beat.
Setup: Gap down bounce day
Premarket pre buzz: >5%
Float: 273 million.
Institutional Ownership: 85%
Short %: 1,73%
ATR: 2,73 ATR.
Average Daily volume (50 day): 2 million.
Daily volume: 8,7 million.
Gap%/Gap ATR: -5,8% / -2ATR
TA: First cue of successful bounce day: Strong open.
Back through VWAP
Wedge/ Trend PB Bullish Trade2hold – Trade
Trade2hold - Flat
Significant 5m close below 20 EMA:
1) close on above average selling
2) a new 5m low that occurs after
Goal: don’t sell more than 50%
when going flat.
-Shallow volume and making lower
highs. Sometimes the trend is still
intact when there’s a significant
close above the 5m 20EMA.
Trade2hold – Core Exit strategy
Hold core, at least 50% of
position, until there’s a true
When price hits you’re
measured move target, hold
your core until there is a true
reason2sell. Trail up your stop
along 5m 9EMA.
Tier 1 at the first lows.
Tier 2 at the second and higher low.
Tier 3 & 4 as the stocks breaks out.
When price bounces of the 5m 9 or 20
EMA, enter within 25% of the range.
-Significant selling volume on 5m.
-Unable to make a new high on low
volume. Double top.
-Time. It’s almost closing time (15:45) and
we are near HOD. Good to take some
Break through OR High.
Wedge visible on multiple
Low volume in consolidation.
Elevated volume when price
breaks out of wedge.
Pattern with higher lows and
lower highs. Tight pattern!
Holds above premarket/
opening range high.
(HTF) Trend PB
10m holds above 9EMA,
5m holds above 20 EMA.
Shallow volume during PB
Pullback visible on multiple time
frames: 1m, 5m, 10m.
Bounce of key level: 108
Elevated volume when PB
starts to work.
I got in after the second low at a 33%
entry. I got in too large due to a mistake,
therefore I didn’t add. It would have
been possible to get a better entry if I
had been more prepared calling the 2nd
Stop was at the low of the wedge, 1 cent
below it. But I changed it later for no
reason and got to break even. Not
according with my trading plan. I did
that because there was an increased 1m
volume bar that failed. I was anticipating
the breakout here. But it wasn’t the true
break out. Therefore, I can’t move my
stop yet. I didn’t add so I should hold on
to my core with the original stop.
Break even: 0R
What was the optimal trade management strategy, in order to
minimize risk when wrong or maximize gain when right? How does
that compare to your trade management strategy? What signals (if
any) did the market provide for moving the stop to breakeven, or
Optimal strategy I want to work on is to add one tier on the first low,
one tier on the second and enter tier 3 and 4 on the breakout.
I ruined this strategy by getting in too big.
What was the optimal exit location or locations, in order to minimize
risk when wrong or maximize gain when right? How does this compare
to your exit location? What signals (if any) did the market provide to
identify this ideal exit location?
My trade2hold target was 2ATR. But then there was no reaso2sell when
we hit that price target: price trended along the 9EMA all the way.
I should focus more on the reasons2sell then
What could I have done
• I looked at DFS and thought, this is up too much. This is a biased
mindset that leads to underperformance. I don’t know have any
data that supports this claim. I know that the intraday price action
is extremely strong, and price is trending. Even when price is up
2,64ATR, there were still 2 or 3 opportunities to get in for a trend
PB. After I got stopped out on my wedge trade there also was a
great opportunity to get long.
I should accept that I don’t know how much it will trend higher. I
should just be dumb and follow the price action.
• I don’t have to worry about price trending all day or not. I should
focus on taking playbook trades and follow that trend. I should
focus at getting great entries. I should accept that I don’t know
what’s going to happen and that I also have a lot of work to do on
my exits criteria/system. And that’s okay. But if I am not getting in
good trades then I don’t have a proper opportunity to learn.