Archive for the ‘Trades’ Category

Example Divergence Trade: Netflix (NASDAQ: NFLX)

October 23, 2017

Here’s a divergence trade I took last week in $NFLX, using the Multi-Divergence indicator in my trade plan. 

The setup: NFLX announced earnings on Oct 16.  Price made an all-time high.  I looked at the chart and saw a big divergence on the volume-weighted MACD.  The last big divergence in June led to a big drop. So I was looking to get in a bearish position. 

The candle on Oct 17 is the most recent bar on this chart. I saw that the bar had made the all time high and then fallen down below the prior day’s close, which I took as my bearish entry signal with NFLX at $200. 

The plan: $190 looked like a possible support, and a return to $204 would tell me my timing was wrong. I thought this move should happen in the next few days, so I bought the Nov 3 weekly options 197.5/195 put spread for $0.97.  I chose the 197.5 strike instead of the at-the-money 200 strike because it had higher gamma—it would have a larger change in delta with movement if I was right.  If the move didn’t come in the next day or so, I would get out and move on. 

I didn’t have to wait long:

The day ended red and had a good follow through day next. When the 190 support was nearly hit, I went to take profits. I sold for $1.57, which is a return of about 62%.  I love it when a plan comes together (extra Hannibal).

Note that the divergence indicator wasn’t the entry signal—it just provided context to give me an edge.  Divergences can often resolve with a continuation in the trend instead of a reversal. The context combined with the actual reversal behavior in the daily candles was what led me to take a trade. Always have a plan before you trade, and always follow your plan. My failures have come when I don’t do one or both of those things. 

New Trade: Long YELP

March 21, 2012

I bought a starter position in YELP today. I like the business, and I also like the technicals. I started considering it after @ragincajun and @the_real_fly
were taking about it.

Here’s the daily chart:

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I like the consolidation here under $24. I also like that price is still above the initial IPO trade price. I also like that it has been creeping up slowly lately, a few percent at a time. I bought at $23.20, and placed my stop at $20.20, underneath the recent swing low. I decided to enter at the price I did from the 5 min chart, as we retraced to the day’s VWAP:

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I intend to hold this for at least a few weeks as a position trade as long as I don’t get stopped out. I would consider taking partial profits at a retest of the $26 high, and I will also consider adding more shares later if the stock acts right by making new highs.

GSVC Update: Position Taken

January 30, 2012

Looking at the chart for GSVC, I’d expect it to retest the support at $16. I placed a buy limit at $16.06. My stop point would be just under $14, with my target a retest of the near $20 all time high. So we’ll see if I get filled. Here’s the chart showing the 16 support:

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UPDATE: I pulled the buy limit down to $15.75 for 1/31/2012. Just got filled at that price. Stop level is $13.25, target is to sell any pop from Facebook IPO news, the retest of $19.9x all time high if we get there. Here’s the current chart:

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UPDATE: I just closed it out at $17.45 as I trailed up behind the late day price rise. I saw all the potential resistance around $17.50 at the left and didn’t want to wait out the retrace, so that’s +1.7 on the trade, or just about +0.85R on the trade.

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(Potential) First Trade of the Year: GSVC

January 27, 2012

UPDATE: it never retraced to $15.78, so I wasn’t filled. Didn’t take the trade.
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As I promised, I was going to blog any further trades and document my thoughts. This isn’t a trade yet, but it may be by the end of the day.

GSVC is going bananas on the Facebook IPO news. They are going to file for their IPO next week. GSVC holds a position in private Facebook shares. I want to buy the rumor and sell the news so to speak. I think this is a good trade because it’s one step ahead of the pack. GSVC is just obscure enough that Joey Retail probably hasn’t heard of it.

I didn’t chase the breakout today. Instead I put a limit buy order out for $15.78. I chose that level because it’s a healthy pullback of today’s move and is just inside some other volume traded back to the left on the daily. If I get filled, then great, if not, there is no position. Here’s some charts showing what I was looking at:

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If filled, my stop level would be $13.78, underneath all of today’s activity. I would hold until the IPO is filed, and I would take at least a partial on the first move to the all-time high at $19.97 if we get there first.

First Trade of the Year: NQ Nasdaq E-mini

January 6, 2011

I haven’t traded in about 4-5 months. I had been putting it off while I worked on other things. Well, today I decided I needed to get my feet wet again. I watched the NQ open, and noticed that the tick/q was trending down along with price, just under yesterday’s high. I watched the price ladder, and it looked like the downmove was stalling out. On the green candle, with the tick breaking out of the down-channel on the right chart, I went long:

I didn’t look at PnL during the trade, as I usually do. My target was there, but I wasn’t married to it. I just tried to look at the tape and the tick and watch for signs that the upmove was exhausted. I didn’t bail on a retrace back down if the tick was still trending up. I sat on my hands when my fear of loss came up. I wanted to punch out and at least book a profit for psychological reasons. But I made myself wait until the chart said to go. And it didn’t do that until my exit point. The tick uptrend failed, but price was still floating up there. To me, that was weakness, so I got out. +2.75 NQ points.

I traded the tape well. I recognized the trend well. I managed the stop well, and exited in a rational way. And apart from a bit of stress at the beginning, I was pretty calm about it. If I can defeat my own stupid emotions, I think I have the tools and experience to trade profitably. One trade at a time, each one no more important than the last.

I read on Stocktwits that “Successful trading is about changing one’s mind ALL DAY LONG”. How true! And I did just that today. Hope you can do that as well.