I said the other day that it sometimes feels like I only trade tech stocks, but that’s not the case. In an effort to diversify what I post here, here’s a trade on UTX, a stock that — whilst it has ‘technology’ in the company name — is not a tech stock in the strict sense.
As we can see from the chart, it doesn’t matter what the industry sector is (aerospace in this case), the patterns and setups work exactly the same. I don’t care if UTX sells microchips, aircraft, or ice cream. All I want to know is where those little red and green bars go.
And on Monday they went down. Fast. We love momentum, so when the pattern set up I was ready to dive in with a short and ride it until it faltered.
It faltered on the next bar. Momentum reversed, a battle raged between buyers and sellers, and I was happy to cover my position and let them have at it. A nice four figure profit in about five minutes.
It’s been a while since I posted a Tesla trade, so let’s rectify that situation right away.
This was short, sharp, and to the point. The trade lasted about six minutes, so that works out at more than $200 a minute (a meaningless but fun statistic).
My study of this particular stock continues, and continues to bear fruit. I could point out that Tesla has been playing around at the $200 price point for a while, but I don’t care about that. I only care about what it’s doing on any given day since the open. I care about short term (i.e. single morning) price patterns. And I care about how the price moves on a minute by minute basis.
My method for trading Tesla is scalping, really. Certainly there are trades to be had on longer timeframes, anything from hours to days, but that’s not my style. Any time we have money in the market, that money is at risk. Tesla is a particularly risky place to put cash because Elon could tweet something mad at any time and send the price goodness knows where. So these quick in and outs are my preferred way to go. In on the entry signal, and out at the first sign of weakening momentum. The great thing with this stock is that a quick in and out, around five minutes in a trade, can yield a four figure profit with alarming regularity.
Another day of WWDC brings another Apple trade. Not as big a win as yesterday’s, but better than a poke in the eye with a blunt stick.
The setup wasn’t as clean on this trade, and we had just crossed the EMA which is a yellow flag (but not a red one). Momentum at the point of entry was good, and the price dropped nicely for about ten minutes. The exit came when momentum fell away to nothing.
Looking at the chart there was more on the table, but it wasn’t signaled, there was no momentum. Trying for more would have been gambling not trading.
There were some other nice trades around too, and not just in the tech sector. I know this blog sometimes feels like I trade only tech stocks, and it’s true that a lot of the big moves happen there (and much of my core list is tech), but there really are trades to be had across the board.
Apple’s Worldwide Developer Conference (WWDC) is arguably the biggest event in their calendar (the yearly launch of the new iPhone gives it a run for its money). The week-long meetup is a chance for developers to learn all about the latest technologies they can use in their apps. It begins with a ‘keynote’ presentation on the Monday morning. This spectacle is aimed as much at the media as it is the nerds, and is used to show off upcoming products, both software and hardware. Given the importance of the keynote — it’s essentially setting the stage for Apple’s next twelve months — the stock price is predictably unpredictable throughout the morning. Too volatile for me. I prefer to wait for the dust to settle. ByTuesday, everyone’s had a chance to digest the news and more considered opinions are traded. Thus easier trades like this one come along:
It’s a nice straightforward textbook setup, catching the easy middle, with a clear target that was hit without trouble. Not as profitable as yesterday’s Facebook trade, but few are. Anyway, almost one and a half grand profit in fifteen minutes is not to be sniffed at.
There was a good opportunity for a second entry shortly after, with another thousand dollars on the table for anyone who traded it.
I’m just posting one chart today, because it’s a peach. This was a late trade for lazy old me, who is usually done by lunchtime, but the tech stocks were a-tumbling, and opportunity was everywhere.
There’s a certain amount of luck in trading, I’ll be honest. Or rather, a certain amount of bad luck. It can often be the case that we miss a great trade because we’re in another not so good one, or because we just didn’t have that stock on our watchlist. FB is one of my core stocks so I’m always keeping an eye on it. And because this was a late trade, I was out of everything else by the time it happened, so could give it my full attention. In other words bad luck did not afflict me, and because I was prepared I was able to capitalize on the opportunity when it came along.
As it turned out, my attention was only required for about five minutes. By then we were heading north again. A pause, or a reversal? Nobody knows, so it was time to get out.
Had I gone for the second entry about ten minutes later, I could have almost doubled my profit. Was that a mistake? Maybe. But the momentum on the second part of the move was less, and I’d made more than enough money for the day to deal with the risk.
Trading in a week with a bank holiday is often a bit odd. A lot of traders take the whole week off, and the market has a different feel. Sometimes trades happen a bit later than usual, as though everyone is relaxing and taking their time. There’s always plenty of opportunity though. Here’s a nice little trade on DKS, a stock I haven’t posted here for a couple of months.
All pretty textbook stuff. The setup wasn’t the greatest ever, but the drop when it came was fast and furious — just the way we like them. The exit was signaled by a clear shift in momentum on the tape.
It’s been a while since I posted a two-biter on this blog. Here’s one that happened on QCOM, an old friend (by which I mean a stock that’s been on my core list for years, not a favourite, because of course we don’t have favourites!):
This trade was never great from the start, with the price dithering and going sideways. Still, QCOM is a stock I’ve traded for many years and is generally quite predictable and reliable. Also, chip makers were heading south in general (we never look at a chart in isolation). So the entry was worth the risk, and indeed for a few minutes it all looked okay.
Then momentum faded. Rather than hope it might turn around, the strategy says exit (and the golden rule says never let a profitable trade turn into a losing one). So I was out with a paltry 14 cents / share. Still, $140 is better than a kick in the teeth, and provides a buffer for another entry should one come along.
And indeed one did come along, less than ten minutes later. With momentum picking up again, and the buffer of the previous trade, the risk on the new trade was very low. This time things dropped further and faster. The final exit came when momentum turned, giving a profit on the second bite of 74 cents, so $880 combined.
People often tell me they get stopped out of trades (which is a problem, because we shouldn’t use stops as exits), and that they then watch in horror as a few minutes later the price goes their way. I’m always puzzled by this. It’s as if people have some kind of rule that says when you’ve had a losing trade on a stock you can’t trade it again for the rest of the session. It’s like a loss (or break even, or smaller than expected win) somehow makes a stock temporarily toxic — to be avoided until the poison wears off. But that’s a folly. A good setup is a good setup regardless of what came before. I never rule out a stock because I might have taken a loss on it earlier. There are many other reasons I might miss a second bite at the cherry, but a disappointing first entry is never one of them.
No massive winners today. Tesla could have been interesting but volume was high and it was too choppy for me. Facebook had a lovely setup, but that happened at lunchtime so I was long gone. We don’t need four-figure trades every day to make a good living though. Indeed we don’t need them at all. Just stack up a few modest wins like this one on ROKU and our account balances will grow.
Strictly speaking the entry here could have been quite a bit earlier because we had a lovely triangle pattern and an obvious exit. I went with the classic entry, and the obvious exit when momentum dropped away.
$500 won’t set the world alight, but as I say, stack up a few modest wins like this each day and we can make a decent wage.
This was well signaled and worthy of the earlier entry. That meant there was enough profit in the pot to ride out the ending a little. Had I gone in later I probably would have exited around the $24 mark. As it is, this yielded $1,330 per thousand shares traded, making it by far the most profitable trade of the day.
The magic of margin means just $6000 in a trading account would be sufficient to have traded a thousand shares of ARRY. Math isn’t my strong point (as we know), but assuming such an account size, I make that a 22% return on investment — in one day. Well, one morning. Well, about half an hour, really. Spellbinding stuff.
Next up, AAPL, because we haven’t checked in with that stock for a while:
The entry here wasn’t quite so gob-smackingly obvious, so I was more conservative on the exit, getting out at the first target for $600. Holding longer would have got us over the $1000 mark, but hindsight is 20/20 and recklessness can cost us a lot more than missed opportunity. All in all, not a bad day at all.
A couple of very nice trades to start the week. First up was DISH, which was just screaming out to be shorted.
It was only decent to oblige, and fifteen minutes later when things calmed down and momentum shifted, it was time to get out. $1,030 profit on that one. It wasn’t the most profitable trade of the day in pure profit terms, but it was the most profitable by another measure — more on that in a moment. The accolade of most profitable trade of the day in dollars gained went to Tesla (again).
This was right at the end of the morning so I nearly missed it. But with all that volatility around the important $200 price point, a trade was always going to be on the cards.
Tesla continues then, to offer hefty rewards to the bold. It’s a high-priced stock, but we can always adjust our position size to something suitable to the price tag. Even cutting the size of this trade by ten would have yielded an easy hundred bucks for a few minutes in the trade. And of course, margin is there to help leverage these moves.
However, if we look at the profit gained for every dollar risked in the market, the DISH trade blew Tesla out of the water. For the same capital that was put on the line to trade 1,000 Tesla shares, it would have been possible to trade 6,000 Dish shares. That’s theoretical as the slippage on such size would have been something to take into account. Still, even if we assumed five times the size, that makes the Dish trade potentially worth more than five grand.
One of the great things about trading stocks is that ability to size up and down according to budget and risk. It’s easy to start small with tiny risk and work up to much larger sums as an account and experience grow. It means stocks are accessible to traders of any level of experience.