Apple used to be the reference for the market. The #1 stock that moved everything. On some occasions I would choose to watch AAPL itself instead of the SPY or the QQQ. It was just the stock that had the most weight in everything, so whatever it would do, the indices would follow.

This is no longer AAPL's market. It's NVDA's now, as the semiconductor sector is taking front stage and dictates the markets moves pretty much to the tick.

Last week AAPL started to break down an important support level and offered a fairly straightforward trade that's worth covering.

Weekly chart

While the Nasdaq (right) is making all-time highs, AAPL (left) is struggling to hold the $180 area. Just look at both charts for a second and see how AAPL doesn't appear to be that relevant anymore. Other names are carrying the index without the need of AAPL.

Goldman Sachs analysts recently removed this name from their Conviction List, followed by Evercore ISI who also removed the stock from its Tactical Outperform list. Notice the shift?

Daily chart

Huge respect to all those buyers who have been holding the line on the $180 area. Unfortunately for them, notice how every pop gets sold. The bounce trade doesn't seem to be working...

Hourly chart

Volatility contracting ahead of a potential explosive move to either side. The stock jumps towards EOD as there's news regarding Apple abandoning their EV project venture. However, that initial hype would soon fade.

Pre-market action

Price finally gave up on that support early in the pre-market, which is what brings this name to our attention. After a strong rejection around 8am, price is set to open below the $180 area.

The trade

As per usual, here's our CPT:

Cue(s)

• Obvious relative weakness for the past few weeks

• Daily downtrend, where every pop gets sold

• $180 demand area broken in the pre-market

• Intraday cue: Price breaking down the $180.12 with a double inside bearish bar

Plan

We have a level conveniently sitting at $180.12. This is going to be our reference for shorts, as many traders will probably be shorting the $180 psych. mark, which aligns with previous support.

If price shoots up and rejects we'll want to short the rejection immediately and risk high of day, just like we do with bounces.

In this case, price did shoot up but held above the level for a while, so there was no trade, until we got a double bearish inside bar breakdown triggering.

Trigger

Double bearish inside bar breakdown

5m chart

As mentioned, the stock does trade the $180.12 level but holds above for a while, so there's no point shorting yet as there's no rejection.

Luckily for us, price sets up a** double inside bar**, with both of these bars being pretty bearish and closing below the $180.12 level, which leads to a breakdown we can use to take our short position.

Price rejects the $180.12 again in the next bar and heads down, breaking the first level at $179.82 and slowly trading its way down.

You'll notice a huge wick to the upside a few bars later. That wick actually took place, it's not a chart error. Price traded above our $180.12 level for a moment. I'm not sure what happened, but it was very brief and soon came back down. In this short time window, once it was clear we were coming back down, there was just enough time to add to the put option position at lower prices.

Price then does indeed resume its downtrend and hits our target at $178.33. Except for that sudden wick, which again, was pretty quick, we'd consider this a low-stress trade.

There's a couple more entries later on rejections of the $178.33, but neither got any follow through unfortunately.

Closing notes

Are we witnessing the fall of Apple as the leader in tech innovation? Apple is yet to make a move in the AI domain. They are usually late to a lot of these ultra-hyped technologies, as they aim to provide seamless experiences to their users.

Question is: Will they deliver?

Time will tell.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

ARM has been holding that earnings gap really well. Semiconductors are still moving and while ARM hasn't really been climbing, the sole fact that it doubled its valuation and has been holding well ever since tells us a story.

It recently had a setup that's worth going over. Let's dive in.

Weekly chart

A somewhat bizarre weekly chart because of that post-ER push. What's important here is how this past week held the previous week's lows. Despite that large ugly wick, buyers have managed to remain relevant and close another green week.

Daily chart

Bulls have been defending the $120 area well, effectively creating a potential higher low in the grand scheme of things. Despite the ugly chart, price is currently consolidating after the post-ER move. Still a normal sign of any healthy uptrend.

Note how that $135 area has been acting as resistance, rejecting price up to 6 times in the past two weeks. Very relevant zone.

Hourly chart

Quite some room to move above if price can break that $135 area we just mentioned. There's levels at $134.82 and $138.32 we can use to trade off of eventually if buyers make another attempt at the breakout.

Pre-market action

I left some of the action from the previous day as I found it relevant. 

Notice how price struggled to break the $132.82 during the previous session. The level rejects again early in the pre-market session, but when it later breaks and retests, price shoots straight up into the $138.22 clearing the $135 area.

Minutes before the bell, the $138.22 gets cleared and price is setting up for an open above it.

The trade

Price is finally breaking above the $135 area, which has been holding bulls back for the past two weeks, and set to gap above a strong level into an area where there's plenty of room to move. This is an A+ setup we've seen before, and thus our  CPT should look familiar:

Cue(s)

• Stock has been holding its post-ER gap really well

• Weekly failure to go lower as buyers held well after that nasty wick

• Strong breakout of the $135 daily resistance in the pre-market

• Gapping up above a key level with plenty of room above

Plan

Our level is pretty close to the opening price, so we'll want to see a quick retest and as soon as price reclaims the opening price, we'll want to jump in risking below the level and targeting the $150 psych. mark.

Trigger

Price reclaiming the opening print after testing the level

5m chart

The trade works really well as we get a clean entry straight off the open on that level retest and reclaim of the opening print. That 10pt push during the first 10 minutes of the session is a blessing. Our first target here was the $150 psych. level.

Although price does nearly reach the $150 later in the day, it wasn't with a lot of chop in between. Chop that most likely stopped out most of anyone's position.

In this particular case, and abiding to the rules of the system, there's a 3-bar play that forms on the 2nd and 3rd 5-minute bars, but fails after triggering the buy, trapping longs and leading to chop. The moment this pattern fails and price trades back below the signal bar, we immediately get stopped out from our trade.

While in this particular case price does hold and eventually resumes the uptrend, more often than not failed 3-bar plays mark the top of the current leg.

Closing notes

There were many interesting setups on this particular day. Despite going with PYPL myself, I felt this was one of the most straightforward setups going into the open, and thus worth our time and review.

The AI hype wave is still much alive and these names are certainly far from done. Keep them on close watch.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

Palo Alto had earnings recently, and despite showing good numbers, the CEO said they expected cuts in their upcoming anual forecast as it seems the industry is dialling back on cybersecurity spending. This obviously scared investors, and the stock plunged a whopping -20%.

Just a few days after the drop, it was reported that Nancy Pelosi had opened a $1.25M position in PANW calls. Pelosi, an American politician and active member in the U.S. congress is well known for her insider trading, which has caused a lot of controversy in the past. She famously bought NVDA at the lows and before the $500 breakout. This is her latest bet.

Weekly chart

We can appreciate that big drop after a very consistent uptrend. Regardless, one could certainly argue this is a somewhat healthy pullback. Notice how price found support in the $260 area, matching previous multi-month resistance, now turned support. There's also a confluence with that upward trendline right at the bounce area.

Daily chart

A somewhat bizarre daily chart after that massive gap down. However, notice how price ended the week with a decent hold. We didn't get much of a post-earnings drift. The $260 area held well and price gapped up both Thursday and Friday, ultimately trading into gap fill territory and closing in the green.

Hourly chart

Again, a bit of an odd chart to show because of the gap. Marked some levels to the upside as we're about to go over a gap and go trade to the upside.

Pre-market action

Price started the week gapping up and after climbing further during the pre-market session, it is set to open right above our $228.25 level. At this point, the news of Pelosi's call option purchase is out, so this stock is on watch, as she's known for her great picks.

The trade

We all know what's coming. Here's our CPT:

Cue(s)

• Stock held well after a harsh earnings dump, with little to no drift

• Stock is in gap fill area

• Gapping up above a level

• Catalyst: Pelosi's call purchase

• Intraday cue: 3-bar play at a level after a 30m consolidation

Plan

I feel like a broken record, but, as per usual, when a stock is gapping above a level, we want to see it retest the level and trade back above the opening print. Our stop is then set below the level and we're looking for at least two levels above as target. This is our standard.

Trigger

Any buy setup triggering on the smaller timeframes near the level, or the opening print getting reclaimed.

2m chart (entry details)

Notice how we get a potential buy setup on that first 2 minute bar but it doesn't trigger. Yet two bars later, we get an even better buy setup, again right off our level but this time after a failure pattern. The trigger is right around the opening print, which adds further confluence to our entry. Notice how the trade works perfectlyall the way to our first level. There's not a single pullback, and this is a 2 minute chart. Let's zoom out now.

5m chart

Price trended all day. And honestly, you could catch a nice chunk just by trailing your stop on every pivot.

T2.1 is after a failure to go higher at a level, which would justify a trim according to our rules. However, you could surely hold some as you have T2.2 at the $297.08 level that can still hold. And it sure does.

T3 is set as soon as price breaks out of the $299.13, to protect yourself against a potential rejection at the $300 psych. level.

T4 and T5 are pivots, and T6 is a bit of a nasty failure bar that triggers our last stop.

Closing notes

Some may remember a few years ago when ARK’s Cathie Wood became a very popular stock picker. Every stock she touched had all eyes on it immediately. It seems like now Pelosi's trades are the hook.

Honestly, I believe this will not end well. Only time will tell. In the meantime, this is free edge for us traders. Take advantage of it as much as you can while it lasts.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

Everyone remembers when PayPal CEO said they would shock the world. We went over the trade leading into the announcement. 

For context, the announcement itself was frankly underwhelming. They announced faster checkout processes, a complete overhaul to their mobile app, and of course, some AI-powered [useless] features. PayPal stock sold off after the event.

A few weeks after the announcement they had their Q4 earnings release, and although they did beat analyst estimates, their forward year guidance fell short of expectations, leading to an 8% slide in the after-hours trading.

Despite these bumpy weeks, stock has been holding surprisingly well. Let's take a look.

Weekly chart

Notice how price broke out of that trendline heading into the announcement, came back down once the news was out to retest it, held there for a week, and then sellers took over on that weak guidance and pushed the stock price back below the trendline.

At this point, you'd expect price to continue lower, as all the longs who bought the breakout are now trapped. Yet price is holding. I found this hold very interesting, and lead me to believe there was upside potential as price settled on this potential higher low.

Daily chart

We can appreciate the action around the flopped announcement with greater detail. Notice how bulls tried to hold the trendline twice after the sell-off. They were doing a reasonably good job until the earnings release truncated their efforts and brought the stock below the trendline once again.

Despite the gap down, buyers quickly bought the stock back up. It's only been two weeks and they've already had multiple attempts to break back above the trendline. It surely seems as we're not going any lower.

Hourly chart

The hourly chart displays a healthy uptrend since that failure to go lower. Price spent that last session consolidating so there's potential to break out and keep going. The $60 mark is the strongest level as it corresponds to the start of the previous down swing.

Pre-market action

Pre-market action was irrelevant to this trade.

The trade

An unconventional trade for what we're used to here, but solid regardless. Kept my CPT pretty simple on this one, let's go over it:

Cue(s)

• Weekly chart holding well after flopped CEO announcement and rough earnings

• Daily chart showing buyers in control as they attempt a new trendline breakout

• Unfilled daily gap above

• Intraday cue: 3-bar play at a level after breaking the opening range

Plan

The plan was to try and participate on that weekly buy breakout. Price was in a range all morning, but near 10am it breaks the $59.29 with a strong bull bar and the moment it starts pulling back a 3-bar play seems possible.

Trigger

Ideally, the 3-bar play triggering, although I did start my position slightly before the actual breakout.

5m chart

Price started the day trapped between two levels. One thing was clear though: That $58.85 kept holding every time it was tested, even putting in higher lows on each bar. Eventually, near 10am price breaks the opening range with a clean bull trend bar and sets up a 3-bar play right at the $59.29 level. I start accumulating at this area with the conviction that we're setting up for a weekly buy trigger. While it does take a little bit of time to materialize, we finally get the breakout. In the meantime, note that the stop loss never triggers.

The moment we break out, there's another 3-bar play forming at the weekly buy mark which allows for yet another entry and plays out immediately, resulting in a stress-free add to our existing trade.

Price starts consolidating around the $59.72 level. It then fails to climb higher, but T1 is never triggered, so there was no reason to get out just yet. A little bit later, T2does trigger ever so slightly. I cut my size here but it didn't seem like we were going to reverse, price was just chopping around on low liquidity.

The wait proved profitable as we would then get the last push into our final $60 target level.

Closing notes

There were better plays on this day, trust me. For some reason I went with this name and managed to do well on it. The weekly chart looked ready to take off, but it didn’t last long as the stock gave back most of its gains towards the second half of the day.

I started the trade with the idea of swinging into the gap fill. Luckily I decided to take everything off as we got the 60 strike calls in-the-money. The pullback after that was quite nasty, I surely wasn't expecting something like that at all. This reminded me that while edge, screen time, and mental game are important, luck can often play a significant role too.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

META had their earnings recently and the stock took off into new all-time highs after an already historical comeback. If you missed that previous entry where we went over their earnings, make sure to give it a quick read as it’s one of the most popular posts to date and will get you into context.

Weekly chart

After the earnings pop into new all-time highs, stock has been consolidating with no apparent signs of any short-term pullback happening anytime soon.

There's a 3-bar play that doesn't get follow-through, but it also doesn't fail as price is still holding on the following week and hasn't traded below that prev. bar lows.

Daily chart

Price has ben ranging, just as the rest of the market on these few weeks. However, I feel its worth highlighting how after making a new all-time high, price has been pulling back setting up potential buy setups consistently, especially on this last day where we also get a clear failure to go lower with a green close.

These were days where other high-beta names were pulling back notable. Instead, Meta kept displaying clear relative strength as buyers kept holding the line and closing green day after day.

Hourly chart

In the hourly chart we can appreciate how price has been slowly coiling, creating a descending wedge. We also get a few levels of interest, which will be relevant as we head into the pre-market action.

Pre-market action

Meta's stock is gapping up notably, which brings it into our attention. Price gaps up above the $476.48 level and holds throughout the whole pre-market, setting up for an open above it.

The trade

Anyone who's been following knows what's coming. This is a very common setup we've seen many times. So here's our CPT:

Cue(s)

• Weekly chart consolidating at all-time highs

• Daily gap up after failing to go lower

• Stock gapping up and holding above a level

• Intraday cue: Retest and bounce off the $476.48

Plan

When a stock is gapping above a level, we often want to see it retest the level and trade back above the opening print. Our stop is then set below the level and we can use the levels above as targets.

In this case, the open is a little too far from the level below, so our stop would be too wide. It's in these cases where we want to look for immediate reactions at the level and find buy points nearby, despite possibly being below the opening print. Here we found two, which we'll go over now.

Trigger(s)

• Price trading above FTGL off the level

• Price triggering 2m 3-bar play

2m chart (entry detail)

In this chart we can see in detail two potential entries the stock offered near the open. 

The first one triggers when price trades above the bounce bar, confirming the interest of buyers in bidding price up.

The second one is a textbook 3-bar play that plays out wonderfully.

Both of these entries happen below the opening print, which is not ideal, yet they offer a much better risk-to-reward opportunity on the setup we're looking at, so, by definition, they're worth the risk.

5m chart

As soon as price reclaims the open, we can relax and switch back to our 5 minute chart to manage the trade properly.

The open is conveniently located near the $480 round number, so the moment price breaks that, we can use the open as our first trailing stop (not marked on the chart). 

The first pivot after price consolidates resolves pretty quickly with a solid bullish trend bar, offering us our first mechanical stop trail at T1.

T2 is set after a failure bar but never gets triggered.

Finally, T3 is set below the lows of a failed breakout (3-bar play) bar, which triggers immediately.

After this pullback, price did later run all the way to the $488.10 target, but I'd argue it wasn't worth the hold.

Closing notes

We had to diverge a little bit of the usual script on this one in terms of our entries to lock in a better risk-to reward. If we had instead waited for the opening print to be reclaimed, the trade would not be so attractive.

This is where context and trader discretion play a role. It's important to know when it's ok to use more or less discretion. As a rule of thumb, it's always better to use less. So keep you discretion knob always in check and dialled at the lows of the range.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

AMD made a better move off NVIDIA earnings than NVDA itself. Its stock is arguably less overextended than NVDA’s (is NVDA really extended though?) and also offers a more affordable option to get involved in the endless semiconductor frenzy.

Weekly chart

Price has been consolidating for a few weeks above those 2021 all-time highs, failing to catch as much momentum as its semiconductor peers. This is the 5th time the stock tests this support level as far as we can tell from this weekly chart. Let's zoom in.

Daily chart

We're not surprised to see price in a range. That was an interesting hold on the lower bound ahead of NVDA earnings. Very small inside bar with bulls holding the line.

Hourly chart

Not much to go over on this hourly chart as -spoiler alert- price is about to gap up off NVDA's strong earnings. Marked a few key levels for our reference later.

Pre-market action

As expected, here's where the action starts. Remember NVDA is gapping up above all-time highs, and although losing some momentum, it's holding ahead of the opening bell.

Not surprisingly, here we have the exact same scenario, as they are highly correlated names. AMD gaps up above the $172.15 level and mildly fades just like NVDA all the way to the open, where we get our last clear sign of bulls committed to holding that level.

The trade

Using our CPT framework:

Cue(s)

• Sympathy play to NVDA's stellar earnings release

• Stock is arguably less extended than NVDA and more affordable

• Bouncing off lower bound of 5-week range around all-time highs

• Gapping up and holding above a key level

• Intraday cue: Retest and bounce off the $172.15

Plan

When a stock is gapping above a level, we want to see it retest the level and trade back above the opening print. Our stop is then set below the level and we're looking for at least two levels above as target, so we'd be targeting just below the $180 area.

Trigger

Price reclaiming the opening print after bouncing off the $172.15.

5m chart

Price does give us a bounce this time right at a level. This is honestly one of the best intraday cues you can get, especially straight off the open. When price just shoots straight up (or down) is when things get tough because you're either in it or have to tame your FOMO. Instead, when you get the bounce, buyers confirm their interest and your trade thesis becomes way more solid and it's much easier to get involved. Targeting the second level you're looking at a +4.5R trade. 

Quite interestingly though, the stock offers a second entry that has enough ingredients for us to add to our position. Stock has consolidated around that $176.42 level and prints a nice buy setup signal bar after failing to continue lower when trading below that red indecision candle. Even if you had taken profits or stopped yourself out around that area, you had another chance to re-enter.

Something that's worth keeping in mind when looking at these charts is that every decision you make throughout this trade is 5 minutes apart. 5 minutes is a lot of time. Personally, I come from a scalping background and that first consolidation at the $176.42 level still feels like an eternity if I'm in a trade.

This second trade is again quite stress-free, especially on the first leg into the low $180s. I'm not sure I'd hold through that healthy pullback, but my algo surely would as the stock never breaks the uptrend. Price never breaches the pivot stop marked with T3, which is conveniently located between two levels where price finds support and bounces back up to the ultimate $183.41 target.

Closing notes

If only it was this easy, right? Honestly, the trade entry, exits, and management is quite systematic. If you go back to previous posts, while there's sometimes some discretion, especially when deciding on the exits, I keep most of the entries and trade management pretty mechanical.

As I often say, if you're not profitable in your trading you either don't have an edge or are failing to respect it. We tend to sabotage ourselves as we struggle to navigate the emotional chaos that stems from the battle between our preconceived biases and whatever is happening in front of us. Your system is your armour. You can't fight without it. Use it.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

We haven't gone over Super Micro Computer in a while. On this past Friday, SMCI offered another great opportunity for a 0dte short and I somehow sat there watching the whole thing happen right in front of me and failed to take action. 

As usual, for self-accountability, here's my recap.

Weekly chart

After a strong bounce early in the week, price is back at the $1000 psych. mark. I've been waiting for this retest all week. There's no question this is a bullish chart, but I would argue that it's still overextended and needs a larger pullback. Let's dive in using the daily chart.

Daily chart

After that first red day with the huge shakeout, it's natural we get a mean reversion move. Add the recent NVDA earnings to the mix and we get our move back to $1000, where price could put in a potential lower high.

In my opinion, everyone who missed that first short is waiting for price to hit this area to try and short again.

Hourly chart

Note how price rejected the $1000 right into the close, giving us our first clue and leaving us with a convenient level at $993.35 we can hopefully use the next day to trade off of. There’s over 150 points to the next level at the $830 area! If you think about it, shorting the $993.35 risking the $1000s offers a massive risk-to-reward setup.

Pre-market action

Left some room to the left so we can appreciate the magnitude of the $1000 rejection around the prev. day's close, indicating there's sellers there and we're surely interested in participating if price reaches those levels again.

The pre-market action wasn't too interesting. Price action on SMCI was a clone of its homologous NVDA, so it was worth looking at NVDA as well to gauge strength and sentiment.

The trade

I didn't really have my CPT ready, hence why I probably missed the trade. This was more or less what I had in mind:

Cue(s)

• Overextended stock reverting to the mean, setting up for a larger pullback

• Strong rejection at the $1000 key level on previous day

• Intraday cue: Quick pop into the $993.35

Plan

The plan was to short the pop to $993.35. 

I came late and unprepared to my desk, and missed the moment price rejected. So the new plan was to look for a quick pullback on the 2 minute chart on the way down and get involved there, but the rejection was so aggressive we never got any pullback.

Price just blasted back down through the opening print and there was no way I could justify jumping into 0dte puts by then. I guess if you trade the stock itself there's a chance you could've caught this.

Trigger(s)

• The slightest rejection at $993.35, allowing for a stop at $1000

2m chart

Notice how quick and strong the rejection was. Price literally dropped $100 points in 6 minutes (read that again). A true blessing for anyone who caught the short.

Just that first red 2m bar had a 25 point range. While the risk-to-reward if we're targeting that lower $830.09 level was still acceptable, when you're using 0dte options as trading vehicle you're inevitably putting yourself in a risky position at this point. That's why I just had to sit there and watch it melt.

The key here was trading the rejection, just as we do often with bounces. Same scenario, opposite side.

The moment price breaks the low of the day is a great place to start trimming. You've captured anywhere between 60 and 70pts in a quick reversal. The weekly 850 puts were going nuts on that delta flip.

I've marked the stop trails for the remaining position. All of them are set based on failure patterns, but only T3 triggers. I wasn't watching anymore at this point so not sure if those extra 30pts were worth the hold with 0dte options.

5m chart

Leaving a 5m chart for reference, as price did hit the $830.09 we discussed earlier, leaving stock day traders with a potential 24R trade.

Closing notes

Not a great week for me honestly. Didn't even feel like reviewing today… Yet even if it's not the best review, it's just good to get it done. I'm not sure what I could've done better here besides being prepared. As much as I look at the chart, there's no way I'd chase this. It just moved too quick and I wasn't ready to trade shares on it.

As the saying goes, luck is when preparation meets opportunity. I wasn't prepared. There's a learning there.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

NVIDIA's much awaited earnings are finally out. They beat on all fronts, guided higher and clearly stated that while they’ve improved their supply, demand still far exceeds it.

Stock added a record-breaking $250 billion market cap increment just this day. For context, AMD's market cap is currently sitting at $293 billion. Crazy times we live in.

Nevertheless, NVDA presented a post-ER setup we've seen before. Let's go over it.

Weekly chart

This weekly chart was still in formation at the time of this snapshot. However, we can see price has finally found some rest after its +50% rally since the $500 breakout. Good and healthy sign. Irrelevant ahead of such an anticipated earnings release, but healthy regardless especially if we want to keep going.

Daily chart

On this daily chart we get a closer look on this pullback. This retracement accounts for roughly a 10% decline off the highs. Nothing too concerning.

Hourly chart

This hourly chart will be somewhat irrelevant as the stock is going to gap up above all-time highs on their earnings beat. Regardless, it's interesting to note that distribution at the $700s. I bet there's many players who offloaded risk into the announcement and many others who are sitting short and excited about this pullback, hoping for further extension to the downside.

Pre-market action

There's no doubt there was a lot of attention in this name at this point. An arguably extended stock was gapping up above previous all-time highs. 

It's worth pointing out how price had lost momentum and had been pulling back throughout most of the pre-market session, however, those previous all-time highs are still holding and thus very much in-play for the open.

The trade

Once again, we've seen this setup before. It's exactly the same playbook as this PANW long we went over a few weeks ago.

So, this CPT should be pretty obvious and not surprise anyone:

Cue(s)

• Market leading stock in strongest sector

• Well rested after much-needed multi-day consolidation

• Earnings beat on all fronts and solid forward guidance

• Gapping up above all-time highs and 3 red days

• Intraday cue: Prev. all-time highs hold the open

Plan

First things first: We're only interested in longs. There's no such thing as overextended Get that out of your head/body/soul/ego. The trend is bullish and this is the strongest stock in the market.

Just as with PANW, we're interested in watching reactions at the previous all-time high mark of $746.11. We have the $740 area right below which corresponds to the upper bound of the multi-day range we saw on the hourly chart, so we'd expect that to hold for price to continue climbing.

While we are looking for an opening drive play, we need to be ready for a potential slow open that then picks up later. Just a quick mental check-in.

Whatever we do, we're risking the low of the day. We can't wait and hold to see if the $740s hold. We get out first, and then get back in if needed. Our target is the $765 level which acted as both support and resistance during the pre-market, and then the pre-market highs.

Trigger(s)

• Price trading below previous all-time highs and reclaiming them. 

• Price reclaiming the opening print.

2m chart

To be fair, the first entry gets stopped out on that second dip. Some people like to wait a couple minutes before taking an entry. I often don't, but I think that's a great idea honestly. Regardless, on that second 2 minute bar, price quickly bounced back up above those previous all-time highs. If you were watching this, chances are you got a better price than the one marked on the chart, but again, we like keeping things as systematic as possible in here.

This trade was not an easy hold with weekly options. IV was settling down but still very high, thus the premiums were very volatile and price action was choppy. At multiple points during the climb it seemed like we were going to fade back down. As I've said before, to avoid making dumb decisions it's a great practice to zoom out. But also, letting bars close. Most of these 2 minute bars were red at multiple points while they were forming, yet most closed green.

The breakout of the $765 was the final push we needed to squeeze those premiums and sell into strength. Holding runners wasn't an option in my opinion, as these contracts were 1 day away from expiration and the IV crush as the stock's volatility settled would further decrease their value.

Closing notes

These trades seem fairly straightforward when reviewed like this. Everything looks great and easy. But it's not. Taking these trades in real-time requires a lot of practice and being at your top mental game.

Mistakes are common in this game, and more often than not lead to emotional buildup that, if not managed, will lead to further mistakes. It's very hard to stay on top of your A-game consistently. The only thing that can protect you from yourself is a well-defined edge, but sometimes we just divert from it. That’s where Floaty, the first personal assistant for retail traders, soon to be released, will provide the ultimate add-on to your toolbox.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

We had an interesting day ahead, with FOMC minutes to be released in the afternoon and NVIDIA earnings after the close.

FOMC minutes are essentially a detailed log of the FOMC meeting that took place 3 weeks prior. Honestly, sometimes market reacts, but most of the times it doesn't. Investors get access to detailed insights about each individual member's stance on the matters discussed, but the bottom line doesn't change.

With respect to NVIDA earnings, there was so just too much hype... There's a feeling of NVDA carrying the market on its shoulders, and given the recent (much needed) pullback, there was some fear NVIDIA might fail to keep up with expectations. 

These two events resulted in a choppy session for most high-beta names, as investors awaited the minutes release and further announcement from NVIDIA. 

BABA (Alibaba.com), a Chinese company, was gapping up nicely in the pre-market. I saw the gap up and honestly decided to pass on it in favour of other setups that didn't get much follow-through. Big mistake. So here's my review so I hopefully I won't ignore it next time.

Weekly chart

Not going too deep into this weekly action because I already did in a recent post. What's important here is that the stock seems to be basing. The company recently had its earnings report, and while there was a somewhat strong reaction to the downside, it lacked follow-through, as bulls held the line.

In the previous post we saw how much BABA had been slammed since its highs. Looks like the selling pressure is getting weaker and weaker.

Daily chart

Daily chart seems range-bound at first and full of noise, but it does give us some clues, in-line with what we just saw on the weekly chart. Look at how buyers held at the lower bound of the range, putting in a failure bar and reversing the post-earnings drift to the downside. Price appears to be putting in a potential higher low after climbing back up to the top of the range and getting rejected.

Hourly chart

Skipping the hourly chart on this one as it's quite irrelevant for the trade we're about to discuss.

Pre-market action

This pre-market action might not seem that interesting but there's actually a very simple takeaway: Price has gapped up and held that gap for the entirety of the pre-market session, trading in a tight range right below a level the whole time.

The trade

Using our CPT Framework:

Cue(s)

• Weekly and daily chart seem to be setting up for upside reversal

• Low-beta name gapping up on a day where we expect chop

• Pre-market gap held on a tight range with a level nearby

Plan

Price has been ranging all pre-market, so in an ideal world we'd love a quick dip (very common when stocks gap up) that would allow us to get involved around the lower bound of that pre-market range.

Any time price is trading in a range and I'm looking to get involved, I always stick to one rule: Never buy the breakout, and never short the breakdown. Instead, you'll want to buy around the lows or sell near the highs. This allows you to place your stop in a place where it actually makes sense and keep your risk in check.

If that doesn't happen or happens too quickly, we'll want to look for bullish price action on the lower timeframes near the $74.53 level, which is the key level to break and hold if we want to see further upside.

Trigger(s)

• Price bouncing off the lower bound of the pre-market range

• Bullish entry near the $74.53 level triggering

2m chart

Price does in fact retest that lower bound of the pre-market range and bounce straight off the open, leaving us with a very convenient bullish hammer signal bar with a buy trigger right above our $74.53 level of interest. We now know that buyers are indeed interested in bidding price higher and have a solid entry point 2 minutes after the bell. You can choose to risk lows of the day or somewhere below the opening print for a tighter stop. I went with the latter but that's up to you.

The trade works immediately and is pretty much stress free until it tops at that failed 3-bar play at the mid-$76's.

T1 is our first trail the moment price breaks $74.94 and guarantees some profits. Same thing with T2 and the $75.19 level. We just trail our mental stop expecting these levels to hold as price climbs up.

T3 is again, the same thing, although this one allows us to add more to our position on that convenient 3-bar play at the $75.59 level.

T4 is our final trail and the one that gets triggered after that failed 3-bar play at the highs.

5m chart

Here's a 5m chart for reference. Again, zero-stress opening drive trade.

Closing notes

Going over these missed trades, especially when I've personally discarded them in favour of others that didn't work well, humbles me and keeps me in check with myself.

Everything seems obvious in hindsight, but if you don't make an effort to actually learn from these now obvious cues, you certainly can't expect to make better decisions next time they pop up.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

Markets have been on an absolute tear for quite some time now. The whole AI theme has driven the markets to new highs with no rest. Are we due for a significant pullback?

Weekly chart

Last week we had our first red week in a while after price traded above previous week highs and failed to hold. Given how much everyone is expecting a pullback, this is worth noting.

Daily chart

The daily chart might be curling and getting us ready for a pullback. Notice how last week's action was essentially price filling the CPI gap and then the turning back down, leaving us with a potential lower high. The $430 area seems like the line in the sand to keep things going to the upside. 

Hourly chart

Here we get a little more detail on Friday's action. Bulls attempted the bounce at the $430s but sellers won the battle towards the close and managed to end the day at the lows, slightly above our line in the sand.

Pre-market action

This pre-market chart is already telling us a story and setting up a potential trade. The $430 psych. level didn't even trade yet. Price has been hovering below the key support area and so far is being rejected on every touch.

The trade

There's a solid opening drive trade to the downside which I never saw at the time as I had other stocks on watch. Regardless, I was able to catch a move later in the day that was so smooth it was hard to believe.

I'll be honest, now that I'm reviewing the action with more detail I feel pretty bad about missing that $430 short off the open. It looks like it had enough ingredients to be a good candidate for a trade.

Here's what my CPT looked like:

Cue(s)

• Price gapping below key support into a new week

• Strong rejection at our key inflection point straight off the open

• Intraday cue: Names like AAPL, MSFT, NVDA showing weakness

• Intraday cue: Strong failure of a buy setup after reclaiming the $426s

• Intraday cue: Sell setup with small bar that allows for larger size

Plan

The moment the buy setup fails on that strong bearish trend bar and breaks back below the level, I'm looking for opportunities to short. At that point, AAPL and MSFT -two stocks I've been watching that day- have also rejected intraday levels.

I was more inclined to short MSFT, but the rejection was too strong, leaving me with little room to put size on. That sell setup on QQQ with a small bar allowed for a better risk-to-reward trade, so I went with it instead.

Trigger

Price trading below the signal bar

5m chart

It was fair game to attempt that long after the $425.98 level was reclaimed. In this market everything is possible. But what's interesting for us is that the setup failed, paving the way for a move lower.

The pullback to the level and that small bar rejecting off it seem too clean to be true. And most of the times these perfect setups aren't that easy later. I took the trade with a bit of skepticism, but the cues were there and the risk-to-reward was definitely worth it.

The trade worked almost immediately and was a relatively low-stress trade. I'm not particularly used to how QQQ moves and its premiums felt kind of volatile, but to my surprise, price went straight to target with no pullbacks. There's no 5m candle that trades above previous bar highs during the whole drop. That's how I measure stress.

2m chart

Here's a close-up of the action using the 2 minute chart. Notice there's just one 2 minute bar that traded above previous bar highs. Again, that's pretty low stress for me.

Closing notes

It seems like these late morning moves have been a theme lately. I'm honestly still amazed on how well this trade worked. I found this day to be full of traps and frankly experienced some relief when this one worked so well.

NVDA has earnings this week. After carrying the market for months, whatever they report will probably dictate where the market is heading next. Until then, stay safe!

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

Apple is the market leader by excellence, although it hasn't been getting too much attention lately as most of the action is revolving around the AI theme, where investors have been mainly targeting the semiconductor sector. 

Apple is yet to make a move in the AI domain. They are usually late to a lot of these ultra-hyped technologies. They're not a company that rushes into anything, as the brand is known for flawlessly executed products that provide seamless experiences to their users. The day will certainly come where they enter this space, and when they do, they will be relevant.

Weekly chart

As we can observe on this weekly chart, Apple stock has been consolidating for months in a 30pt range. It recently approached the psychological $200 level as it briefly made fresh all-time highs, but was rejected and price dropped all the way to the $180 area, where it found support. I've marked this area in gray as it's not only the previous all-time high from 2021, but it looks quite relevant judging by how many times price has reacted to it recently.

Daily chart

This daily chart is what brought this stock to my attention in the first place. Note how that last daily bar bounces at our $180 area and closes slightly green, leaving us with a failure to go lower and setting the stage for a potential bounce play. There's an unfilled gap above. We know these gaps act as magnets for price. So far things look interesting.

Hourly chart

There's no question this chart is in a clear downtrend. Now give that last session a thorough look for a second. 

Notice how price had an impulse move down straight off the open, then [bear] flagged pretty much all day, and when everything pointed to a continuation move lower, buyers take over and create a failed failure pattern, which results in a strong push into the close.

This is a great example of why we mark these important supply and demand areas from our higher timeframes. Although we may not directly take trades off them, having that gray area in our charts may have saved us from taking that failed short.

Pre-market action

This is not exactly the pre-market action we want to see if we're anticipating a bullish trend day. The weakness throughout the whole pre-market session is palpable. Notice how the stock is weak even before the overall PPI drop. The $185.32 level rejected the after-hours spike on the previous day and rejects again during the pre-market. Very little enthusiasm from buyers so far, we'll have to be careful on this one.

The trade

Our trade is essentially based on the stock bouncing off the $180 demand area. We're expecting the daily buy setup to trigger and hopefully a nice intraday trend that leaves us with a solid bullish trend bar. This means we're interested in entries above the daily buy trigger at $184.50s (corresponding to prev. day highs).

Here's what our CPT would look like:

Cue(s)

• Stock bouncing near the lower bound of the weekly range

• Recent daily candles have lower wicks showcasing buying

• Clear bullish reaction at a strong demand area

• Price potentially putting in a higher low

• Intraday cue: Notable weakness throughout the pre-market

• Intraday cue: Daily buy fails aggressively leaving longs trapped 

• Intraday cue: 3-bar play sets up a potential 4.5R trade

Plan

Once again, this pre-market action is not really convincing. So we want to see a strong break of the daily buy trigger and -only then- find intraday higher lows to trade off of. Ideally risking that daily buy, or if we get a strong open maybe use the $185.32.

Trigger

Intraday higher low after breaking the daily buy.

5m chart

Stock opens up strong and price heads straight up to trigger that daily buy. We never get a reason for entry as price does a 180º turn and pulls back aggressively leaving breakout traders trapped.

We really liked that daily chart with that bullish hammer setting up a potential bounce off the $180 demand area, but remember we were also concerned about the overall weakness in price throughout the pre-market. Now, this strong rejection after triggering the daily buy tells us a story that we don't want to hear. This is not a slight pullback. That bearish 5m bar completely broke down previous bar lows and changes the picture. 

We know longs are trapped, but there's nothing to do until that next bar forms. That next bar is a bearish inside bar that sets up a 3-bar play to the downside. While we're still above the opening print, longs are still trapped (judging by this small inside bar), and if price were to trade back down to our demand area and tag the $181.97 level, we're looking at a +4.5R trade.

The 3-bar play setup triggers and the trade works immediately in our favor as the market is starting to pull back due to the SMCI drop. This doesn't benefit all the trapped longs, who are forced to get out further fuelling the drop, leaving us in a very comfortable position all the way to our target. Notice that we're not interested in holding past the level as we're essentially at the demand area we've been talking about, thus a bounce is expected.

2m chart

Leaving a 2 minute chart for reference. Notice how quickly that failure happened. That's what we want to see any time we talk about trapped traders. When it's so aggressive and so quick, some of those longs haven't had the chance to exit yet, they're still considering what to do. The bounce near the opening print is weakand sets up the lower high that will lead to our profitable short trade.

Closing notes

Being able to flip sides quickly is an underrated skill. A lot of traders have their long plan, just as we outlined ours, and when it doesn't trigger they'll just sit there or find another stock and force a trade just to feel productive. This is essentially what happened to me on this NVDA trade. Although I didn't force anything, I got distracted by another stock instead of remaining focused on my main watch.

If you've planned and studied a stock well, stick with it. You're way more likely to understand participant positioning and psychology. This becomes especially interesting when what you've planned for does not happen, as you're more prepared to make quicker decisions and potentially profit off the failure itself.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

On Friday the 16th SMCI finally capitulated and dropped 200pts. I'm sure reviewing that trade would get us a lot of views. Yet truth is I did not participate in the short at all.

I watched every second of the move happen live and it never offered an entry that aligned with my system.

Do I feel FOMO? Not at all.

Should've I jumped in anyways? No. Absolutely not. Two years ago I had an extremely rough year. A huge part of that was due to my trading system from back then completely falling apart. I've worked very hard to study, build and learn a system that aligns with my goals and personality, and I have no intention of disrespecting all that work.

Should catalog the trade and add it to my playbook? Absolutely! I've already spent some time with the chart and replaying the action. There were some reasons to get involved and I could've probably caught part of the pie if I was focusing on that name exclusively. But I wasn't.

Instead I was looking for NVDA to break out of its consolidation and lead us higher. I want to go over my original trade idea, and how I could've used NVDA as a vehicle to profit off the SMCI drop.

Weekly chart

We're all familiar with this weekly chart by now, no point going into too much detail as there's not much to say despite the obvious. Stock is up over 45% since the $500 breakout and shows no signs of stopping. It might be worth noting it has earnings next week.

Daily chart

I'm not sure I'd argue the momentum is slowing down by looking at this daily chart. Higher lows are being put in as the stock consolidates around all-time highs, potentially getting ready for a move higher. Notice how price gapped down on a hot CPI print a few days ago, but buyers immediately picked it up and managed to put in a pretty solid green day, showcasing their strength.

This last red inside daily bar may give us a trade to either side, although I'd rather take longs while the trend remains bullish.

Hourly chart

Price is ranging as we already saw on the daily chart. We have two strong levels at $741 and $738.49 which are near the inside daily buy trigger level and may become strong candidates for a long trade entry. Once again, not too interested in the downside just yet.

Pre-market action

This is what caught my attention and made this name my main watch for the day. Despite being OPEX and a Friday ahead of a long weekend, NVDA was set to open above our daily buy trigger after consolidating for a few days and nearing all-time highs. Furthermore, a bunch of upgrades came in that morning.

The trade

This is what my CPT looked like into the open:

Cue(s)

• Market leading stock in strongest sector

• Well rested after much-needed multi-day consolidation

• Bulls have consistently demonstrated strength all week

• Gapping over an inside red day despite SPY down on PPI print

• Higher lows on the hourly (ascending triangle)

• Tons of upgrades just came in

Plan

The plan was to watch for bounces at $738.50s and look for longs as soon as the open was reclaimed. Add on the $741 break and hold unless the $741 broke back down.

Trigger

Bounce and reclaim of the opening print.

2m chart

While we were not really expecting that initial drop, there was a nice bounce play that one could scalp for a decent profit.

As the stock created a new high of day the tape was getting heavy and price started losing momentum. I decided to take my gains and step aside, waiting for further action.

The $741 level, conveniently aligned with the opening print, starts rejecting, which again is something we weren't really expecting. More reasons to sit out and watch.

Price puts in a nice bullish reversal bar setting up a potential higher low at the $738.49 which certainly looks like it could lead to our second leg up into new daily highs. But this buy setup fails on the next bar. Again, another clue.

At this point, if you peeked at SMCI chart, it was starting to fade... Interestingly though, NVDA failed before SMCI.

Here's where I think I could've done better. I was happy with my long scalp and decided to sit back and watch the SMCI drop.

Of course at that time I didn't know SMCI would never offer an entry. But NVDA did! That failed buy right at a level offered a clean entry to the downside that would be instantly fuelled by the SMCI drop and allowed anyone to profit off it while trading with a defined risk, healthier premiums, and a more liquid underlying stock.

The trade was effortless as SMCI was capitulating and it dragged down not only the semiconductor stocks but pretty much the whole market. NVDA was the stock I was watching, but there were many other names you could've used to capitalize on the drop.

Both NVDA and SMCI hit their respective downside levels at the same time, so you could take partial profits right at the level for a 6R trade and leave the rest in case there was no bounce (there was).

Closing notes

Sure, the NVDA drop may not have been as sexy. And we all know the premiums on SMCI made life-changing moves. But that's not the point. 

The point is about finding a trading vehicle that allows you to profit off events like this while keeping your risk in check. Someone with a small account couldn't afford to trade SMCI's 0dte options without assuming a massive risk. Of course, now that we know how it played out it's very easy to say you could've 10x'ed your account. But at what cost? Those premiums were not cheap and had huge spreads. A 10pt bounce (20% of an ATR) and you'd be cooked before even thinking of getting out.

This whole SMCI story is far from done. Remain calm and alert, as there will be plenty of opportunities to get involved moving forward.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

We've all witnessed how Tesla stock hasn't been getting any love for the past few weeks, as all the action is now in the AI-related names, mainly in the semiconductor sector. Quite ironically, Tesla is probably the company that has the most advanced real-world AI, yet investors seem reluctant to bet on it, for now.

Weekly chart

After that multi-week aggressive drop, looks like price has finally found some support at the $180 area, as it looks like the stock is basing there. We got an interesting weekly bar last week with that failure to go lower on what looked like a potential 3-bar play setup to the downside that failed, leading to a very profitable trade.

Price is now trading within the previous bar's range as we wait for further confirmation for some much-awaited relief bounce to the upside.

Daily chart

I'm not a pattern guy. I rarely if ever trade off patterns, but this one stood out to me and I figured it was worth highlighting. TSLA's daily action looks like an inverse head & shoulders formation, which is generally bullish. There's also an unfilled earnings gap above which could act as a magnet for price.

Honestly, all I care about in this chart is the daily higher low that's potentially being formed. This is the first time in a while we see a potential higher low being put in. This is what really catches my eye, which added to the weekly failure we just saw adds to a good long thesis.

Hourly chart

There's a few things in this hourly chart that are worth our attention. First, the lack of momentum to the downside on the 13th. Yes price is trickling down but the action is pretty choppy all day as there's no conviction from sellers. Buyers manage to even close the day slightly green, leading to the gap up on the next day where again every push down is bought back up and the day closes on a strong note.

There's a few levels of interest. The $192.55 seems strong as it started this last downturn. Also, look at how much room there is to our next level at $198.87. That's over 6pts with no levels and an unfilled daily gap....

Pre-market action

Notice the spike in after-hours leading to today's session. A 13-G filling filed after the close and led to a lot of confusion with regard to Elon increasing his stake in the company from 13% to 20%, which was finally not the case. Nevertheless, this surely brought some attention to the stock on the following day.

There's not much to highlight in the pre-market. Price keeps reacting to the $190 psych. level but that's not surprising. We're clearly set to open very close to the $188.79 level, which is fantastic because we can plan a trade off of a potential bounce there.

The trade

Those who've been reading know that the plan here would be to look for bounces off the $188.79 and buy as price reclaims the opening print risking the lows and looking for a strong opening drive push. Well, reality was that the opening drive did happen, but the entry never triggered.

Just as we saw on yesterday's post, the only thing wrong with missing that first move is disregarding the stock for a potential continuation trade. Just like ABNB, TSLA offered a continuation move that was clean and worth going over.

Here's what our CPT would look like:

Cue(s)

• Multi-week base after strong drop with weekly failure

• First daily potential higher low being put in after weeks of selling

• Inverse H&S pattern forming on the daily chart

• Unfilled earnings gap above

• Intraday cue: Strong opening move reinforcing the higher timeframe thesis

• Intraday cue: Trend pulling back to a strong level and setting up a buy setup

Plan

The plan all day is to look for favourable risk to reward setups to get involved, especially after missing that opening drive. First opportunity is the 3-bar play that sets up right at the next level which triggers but doesn't get immediate follow-through. 

Technically it doesn't stop you out, but the moment the level is lost so aggressively I'd definitely be out.

So after that we're just waiting for any buy setup to get involved, preferably at a level we can use to gauge our risk. We get a couple at the Weekly Buy level but none trigger. Instead price comes down to test the $192.55 level once again and offers a convenient buy setup after failing to trade below prev. bar lows, putting in a perfect bullish signal bar.

Trigger

Price trading above any bullish signal bar.

5m chart

Price chops around slightly after our entry but anytime you're getting involved in a trade so late in the session you know you're likely going to sit there for a while. Volatility happens near the open, here we're expecting something different and should use the proper instrument for a longer trade. This day was a Thursday, so if you're targeting the level above, the $200 mark, or the gap fill, you should definitely consider going for at least 1-week out expirations when trading options.

Anyways, the trade works well. There's a slight consolidation on the weekly buy area which not only lets us trail our stop (T1) but also allows for a second entry with super tight risk.

Price consolidates for almost an hour when it gets to the lower bound of the gap. We've gone over this plenty of times. Gap bounds act as support/resistance levels, so this consolidation is expected. And honestly, while it may be boring, it shouldn't be stressful. There's not a single break of the first low pivot (marked T2), so you should be fine holding through.

When the next leg up starts price is officially in gap fill territory. T4 is set at the lows of that 3-bar play as soon as it triggers to the upside, just in case it fails.

T5 is somewhat aggressive but at this point, when you've been sitting through an hour-long consolidation, you'll most likely want to protect what you have. This trail does trigger and nets you a +6R trade.

We're not seeing signs of potential failure yet and price is holding well above our trend EMA, so you can leave some runners until the EMA gives up. Which it never did.

Price closed at the highs that day.

Closing notes

This trade reinforces the idea we went over yesterday, where you don't have to catch the first move to profit off a trending day. First moves are quicker and arguably less stressful as they're a lot more binary in their outcome, but a solid entry for a second leg can prove to be very profitable as we've seen today. 

Of course, there's a bigger picture thesis that must be in play for this to happen. Today we had a bunch of higher timeframe cues that led us to believe the intraday trend could continue, thus leading us to take this trade.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

We've done a few Airbnb posts lately. They recently had their Q4 earnings. In a nutshell, they beat in revenue, approved a $6 billion stock buyback, and announced they're starting a multi-year plan to expand the business into other areas.

Honestly, that didn't seem too bad, yet the stock gapped down around 3%. However, buyers quickly cleared all the doubts on the day after the announcement, paving the way for a solid long trade we're about to go over.

Weekly chart

This weekly chart is tricky because the stock is gapping down after their earnings report, so this last bar feels a little bearish (especially with that potential a failure above that previous pivot). However, the week isn't over, there's still two days to go. Note that overall Airbnb stock has been in an uptrend as buyers keep trying to break that IPO price.

Daily chart

Here's where we get our first big clue. Look at how buyers held the IPO price after that 3% gap down and further intraday downside.

Look at those few previous days before the earnings release. All of them are green. Now picture how many longs are in the red after the earnings gap down. That is probably what led to the initial selling pressure. Yet what a comeback into the close! Buyers managed to leave us with a huge failure to go lower, as well as a close above that IPO price we've been using as reference in pretty much every Airbnb post these past few weeks.

Hourly chart

Here we get a zoomed-in view of what actually happened on the day after earnings. Right off the open price attempted a quick bounce and was pushed all the way down to the $142 area by aggressive selling. Yet buyers managed to keep those lows as the lowest traded price for the rest of the day. Every little drop was being bought back up, putting in consistent higher lows all the way to the close, where we get a second rejection of the $149.21 level.

Pre-market action

As we've seen before, ABNB is a pretty illiquid stock outside regular trading hours, but note how price is set to open right at the $149.21 level we were looking at.

The trade

Believe it or not, I had ABNB on watch this day, yet somehow I completely missed the first push. Usually I would review the trade anyways, but given that I actually caught the second leg, I'll go for that one instead.

This was my CPT before jumping in:

Cue(s)

• Recent earnings were not that bad

• Earnings gap down got bought up

• Daily failure and close above IPO price

• Intraday cue: Daily buy triggers and leads to a strong intraday push

• Intraday cue: Stock pulls back to support level

Plan

The plan was to look for entries off this support level. I watched every bar forming since that aggressive pullback and waited patiently to get involved. I like to trade off failure patterns when possible. We got two.

Trigger

Price trading above the signal bar.

5m chart

We could argue if the first trade was a good entry or not, as the signal bar closes below the level. However, the trigger is right at the level so I guess it was fine. Regardless, although the trade initially worked, price did come back to retest the level once again.

Sometimes you take that first trade and you end up closing for a small profit or break even. The trade disappoints you, as you expected a stronger move. You get distracted by your own emotions and disregard the fact that there's plenty of time left and the setup is still there, which leads you to miss the good move. Always remain concentrated until your idea is invalidated.

The second entry is where things get very interesting. Price puts in an intraday higher low, again at the level. Our signal bar is an outside bar that fails to go lower and closes at its highs. I was watching the tape here and it was a little weird because there was not much size going through yet price moved pretty quickly. Regardless, the setup was there and our job is to take it.

The trade works immediately. There's little to no stress on this trade. By the time price starts chopping around right below our target level, the weekly option premiums are up around 100%, which means you could very well trim some there and hold the rest. There was no failure that hinted a longer pullback was coming, so there was no reason to sell until the target (besides the option premium decay).

Price closed at the highs that day.

Closing notes

As I've mentioned countless times, I'm very keen on trading the open. Somehow I failed to capitalize on that opening drive move. But keeping the chart open and remaining patient proved to be the right choice.

This trade reinforces the idea that you don't always have to catch the first move. This is something I personally struggle with, as I tend to pass on any setup that has started without me. Instead, the idea is to use that move as another cue, and keep the name on watch. More often than not, there will be a good second entry.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

This is Part II of yesterday's post.

In today's entry, I wanted to go over another trade that NVDA offered yesterday to the short side, which I took a loss on.

The higher timeframe is the exact same as yesterday's post, so feel free to skip straight to the trade if you've already read this.

Weekly chart

Won't go into the obvious here because everyone is well aware of this monster move by now. Stock is up +45% in 5 weeks. The AI hype is driving the market and NVDA has been leading the way. It seems like she might be setting up for a bit of a pullback, as we're currently below the weekly open after an attempt to continue higher.

Daily chart

Here we get more details on what we just saw on the weekly chart above. It's important to note how price gapped down on a hot CPI print, yet buyers immediately picked it back up and managed to put in a pretty solid green day, even after that high volume ugly red bar.

The $700 area appears to be strong.

Hourly chart

Price is currently in a range, although the keen eye might have observed there's technically a daily failure to go lower on that strong CPI bounce, as price closed above the prev. day's lows. This was not obvious in the daily chart, but is certainly very interesting to note because it paves the way for a clear long from $730.90 to $740.51. Both of these levels are near round numbers, so we can count on more eyes if they do trade.

On the downside, that $704.33 has proven to be very strong, as it's near the $700 area. Overall, looking for shorts above this $700 mark doesn’t seem ideal…

Pre-market action

What a beautiful pre-market chart. We get a nice gap up above our level of interest and price consolidates above it, all the way into the open. Note how the level holds every time it gets tested.

The trade

I came in late to the day and scanned charts. This NVDA chart caught my attention, let me outline my CPT and go over the trade:

Cue(s)

• Market leading stock in strongest sector

• Stock losing momentum after a +45% rally in just 5 weeks

• Intraday cue: Bulls fails to take over the $740.51, forming an intraday double top

• Intraday cue: Price breaks back below prev. day highs, setting up a potential daily failure

• Intraday cue: Price breaks back below the opening print with strength

• Intraday cue: Price breaks the low of day as the $730.90 gives up

• Intraday cue: Price rejects twice at the $730.90

Plan

The plan is to short a rejection at the $730.90 and ride it down to the next level (not shown), risking the opening print which is around 2pts away from our entry.

Trigger

Price rejecting the level

5m chart

We're just looking at the 5m chart as I rarely use the 2m past noon. Let's go over it:

First we get our long opening drive trade which we went over on yesterday's post.

Price pulls back as the $740 area rejects, but bulls give it a second try. They fail again, setting up a potential intraday double top that will eventually trigger a few bars later.

After breaking the double top neckline, price actually retests it very cleanly before making the real move towards the downside. I guess you could've traded that if you were keen enough to spot it in real time.

Price drops over 15 points from the retest of the double top neckline to the first bounce. That's quite a strong move. These strong moves are usually followed by pullbacks or consolidations and, more often than not, a continuation move to the downside.

Price starts consolidating below the $730 area for a while. As a quick reminder, we're below the opening print at this point, so the daily candle is red, and is also setting up a potential failure after breaking prev. day highs and pulling back below them; which leaves us with a pretty bearish short-term look on the higher timeframes. The hourly chart is showing a tight consolidation below the level which, in my opinion, was asking for a red trend bar to follow. All these things aligned gave me reasons to position myself for a potential continuation move down.

So now let's go into the trade, bar by bar:

Bar 1 is a small inside doji bar that is potentially creating a lower high after that previous pivot that rejected near the $730.90 level. A break below it sets us up for a potential move down.

Bar 2 triggers that short entry.

Bar 3 is almost an outside bar that closes above Bar 2. We knew this could happen. There's a level above that hadn't been tested. So we're OK with this at this point and are looking forward to see how price reacts to the level.

Bar 4 wicks off the level and is exactly the type of reaction we wanted to see. It also creates a failure pattern off the highs of the previous pivot and sets up another entry to add our remaining position which triggers on the next bar.

The trade starts working. At this point, all we need is for price to break that support trendline that's been holding throughout this large consolidation.

Bar 6 bounces off the trendline, but sellers manage to win that battle and the bar closes as a bearish inverse hammer, setting us up for a potential breakdown and even offering us yet another entry level.

Bar 7 is exactly the last thing we'd like to see after that previous bearish bar. Buyers make themselves strong in the trendline and it's clear sellers have lost the battle as soon as the next bar trends back up into the level.

The opening print gets tested and from then price starts teasing both sides for around 40 minutes, although the truth is every quick drop is bought back up. Buyers hold onto that $730.90 and they eventually squeeze out all shorts into the close (not shown).

Closing notes

Honestly, I felt a quite frustrated about this trade not working. I thought it had so many ingredients for a successful short, but judging by the squeeze towards the end of the day, it seems that the trade was too crowded.

Everyone is eagerly waiting for this pullback to happen and no one wants to miss it. When everyone wants the same thing, it just won't happen. We'll have to wait for the next one.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

What can I say about NVIDIA stock that you don't already know? The AI hype wave has brought this name to everyone's watchlist.

By now there's probably a mix of investors piling in and shorts getting hammered. There's no doubt that a large percentage of traders are waiting for any signal to bet against this name, hoping to catch a significant drop as price reverts to its mean.

So far, every quick drop is getting bought up, adding to the despair of impatient short sellers who are trying to nail a top that never seems to come.

Side note: Don’t try to catch tops and bottoms. We’ve gone over how to properly trade reversals. It’s not hard. Go back and read those posts if needed.

Weekly chart

Won't go into the obvious here because everyone is well aware of this monster move by now. Stock is up +45% in 5 weeks. The AI hype is driving the market and NVDA has been leading the way. It seems like she might be setting up for a bit of a pullback, as we're currently below the weekly open after an attempt to continue higher.

Daily chart

Here we get more details on what we just saw on the weekly chart above. It's important to note how price gapped down on a hot CPI print, yet buyers immediately picked it back up and managed to put in a pretty solid green day, even after that high volume ugly red bar.

The $700 area appears to be strong.

Hourly chart

Price is currently in a range, although the keen eye might have observed there's technically a daily failure to go lower on that strong CPI bounce, as price closed above the prev. day's lows. This was not obvious in the daily chart, but is certainly very interesting to note because it paves the way for a clear long from $730.90 to $740.51. Both of these levels are near round numbers, so we can count on more eyes if they do trade.

On the downside, that $704.33 has proven to be very strong, as it's near the $700 area. Overall, looking for shorts above this $700 mark doesn’t seem ideal…

Pre-market action

What a beautiful pre-market chart. We get a nice gap up above our level of interest and price consolidates above it, all the way into the open. Note how the level holds every time it gets tested.

The trade

I bet you've already figured where this is going, but let's outline it using our usual CPT Framework:

Cue(s)

• Market leading stock in strongest sector

• Fails to close below the first bearish daily bar in a while, even after a 2.5% gap down

• Gapping up over a level in the pre-market

• Intraday cue: Price bouncing at the level and reclaiming the opening print

Plan

This has all the ingredients for an opening drive play. We've seen a lot of these. Our plan is always the same: Look for a retest of the level near the open and watch for a reaction. If buyers step in, go long risking the lows.

For further confirmation, we'd love to see a dip below the $730 round number, as quite possibly there's many stops sitting there from buyers that have been accumulating during this pre-market range action.

Trigger(s)

• Price bouncing off the $730.90 level

• Price reclaiming the opening print

2m chart

Look at that second 2m inside bar. I placed a buy on its highs because it's an inside bar that bounces strong off the opening print after sellers tried to take the stock below it. It never triggered, but I thought it was interesting.

Our first trade of the day comes as price comes back down to test the $730 area and bounces. We have our bounce off the $730.90 and quite conveniently the 2m bar that bounces closes right above the opening print, giving us further confidence to take the long risking the lows of the day, although you could easily tighten your stop even more as you observe price holding the opening print on that entry bar.

The trade works well and hits our first target before 10am. We now have the “clear long” we were discussing on the hourly chart above.

If you're trading with the trend, you should always try to hold part of your position in case the stock keeps trending. In this case, our stop point is marked with T1 and is the result of a failed breakout of the $740.51 level.

5m chart

This 5 minute chart is quite consistent with what we saw on the 2m chart. What I mean by consistent is that once you had your entry, switching to this slightly higher timeframe would've resulted in similar real-time analysis and results. 

We can see how price created a clean 3-bar play on its way up, allowing you to either add to your position or trail your stop to the rest bar lows, which had bounced at previous day highs.

We can also observe the two failures near our target level, which leads us to trail our exit stop, as we know that two failures usually lead to moves in the opposite direction.

Closing notes

Every time I review one of these trades it just reinforces the fact that I can't afford to miss them. If you're serious about trading you should definitely feel that burn. These straightforward setups happening near the open -where most of the trading activity for the session takes place- are must-haves in anyone's playbook and can kickstart your day more often than not.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

It's been a while since we last went over Disney. 

They recently had their Q4 earnings release and judging by the markets reaction, it seems that investors liked announced. Disney reported a beat on EPS and their revenue fell in-line with estimates.

They’ve lost some subscribers in their core streaming product Disney+ due to price hikes, however, they're now making more money from those who stayed and any new customers that join. So that’s a win.

They're also doing well on a bunch of cost-cutting measures they announced last year, which they plan on continuing moving forward. We know how much investors love cost cutting. Remember META's recent earnings?

Let’s jump into the trade.

Weekly chart

This weekly chart is as bullish as it gets. This leg we're currently in is arguably overextended but we should all agree there's no point in even thinking of shorts. 

Price broke the long multi-month descending wedge, flagged nicely for 7 weeks, even giving us a few failures to the downside, and resumed the uptrend. The previous week monster candle is due to an earnings gap we'll be able to appreciate on the daily chart.

Daily chart

What's interesting to see on this daily chart is how well the earnings gap is holding so far. The two days that followed the gap day haven't traded below the previous day's lows, denoting how buyers are accumulating at these levels and may not be expecting that much of a pullback.

Hourly chart

Very similar hourly chart to yesterday's post. Price is in a range, but we now have a few levels of interest we can use to trade off of. 

Once again, this chart is isolated from the previous action because the picture has completely changed after the earnings gap, so anything previous to that is irrelevant at the moment.

Pre-market action

Here's where things start getting interesting. It's CPI day and the report came in hot. Inflation came out higher than expected and the market sold off as you can see in the SPY chart (left). However, while the SPY and many other high beta stocks are set to open considerably lower, Disney (right) stands out on how well it held the drop.

The trade

I wasn't planning to trade given the huge move in the pre-market. In fact, during the first few minutes after the bell everything was very dry as traders lacked conviction to either side. Eventually I found an entry and took it with small size and a whole lot of patience.

Using our CPT Framework:

Cue(s)

• Weekly chart is as strong as it gets after flipping to an uptrend

• Stock has been holding the earnings gap for the past few days

• Stock is set to open with surprising relative strength vs. the overall market

• Intraday cue: Bullish 2m reversal bar on the lower bound of a range

Plan

Again, I wasn't planning to trade, so there was no plan pre-market. And that's totally fine. Not all trades happen at or near the open. Sometimes you need more clues. Today was definitely one of those days. After the CPI dump you usually don't want to rush things.

The cues outlined above gave us direction in terms of where to look for a trade. And eventually, we got our signal and could make a plan.

The signal was that last item in the list of cues: a bullish reversal bar on a lower bound of a trading range. So the plan was to buy the break of that bar, risking its lows and targeting the $110.44 above. I went with small size on this one, which hindsight was key because it allowed me to hold for the whole move.

Trigger

Price breaking the highs of the bullish reversal bar

2m chart (entry details)

As a quick reminder, we're watching Disney because it's the stock that has shown the most relative strength vs. the SPY after the CPI drop.

Price pushes straight off the open. Doesn't even come down to test the level, denoting strength from bulls. Soon enough, it starts creating this 40c range. At this point, I'm looking to get involved in the lower bound of the range. 

Side note: Never ever buy at the top of the range, or sell at the bottom.

Price breaks the range to the downside but quite conveniently buyers bid back up and print a 2m bullish reversal bar at the lower bound of the range. And as we just went over, this was the final cue to create a plan and look for an entry on the break of it’s highs.

Price breaks above the bullish reversal bar on the next 2m candle, triggering our entry.

5m chart

There were some up's and down's as price traded towards our target. As mentioned, given the characteristics of the day, I chose to position myself with small size, and that turned out to be a great idea because quite honestly I doubt I would've been able to hold through these swings. Nevertheless, we can see how, despite the pullbacks, price trended all the way to our target, putting in consistent higher lows at our Trend EMA, which I was using both as a trend gauge and as stop level (which never triggered).

Closing notes

On a day like today, you either trade the indices or have to find something that gives you enough reasons to be worth the risk. In a market completely led by AI and the semiconductor industry, I'm not sure if Disney was worth the risk, but it did offer enough reasons to give it a go. And I'm glad I did.

Not every day has to be a PnL day. A lot of my days are used to build confidence. This was one of them. As I always say, your confidence equity is way more important than your dollar equity. I destroyed my confidence back in 2022 and building it back is the hardest thing I've ever had to do. Whatever yo do, protect your confidence.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

ARM recently experienced an extraordinary push after its last earnings release, and has quickly doubled its value. This has brought attention to this name from many investors who were maybe unaware of this company, or simply chose to focus on more common chip names like AMD, NVDA and other usual suspects.

The avid reader knows I've been talking about ARM for weeks. I believe it’s a great investment opportunity. In this post I talked about what they do and why they're an extremely relevant player in this sector.

Today we traded an extraordinary move that’s worth reviewing. Let’s dive into it!

Weekly chart

This weekly chart is a bit bizarre right now because of the huge earnings gap from last week. Leaving it here for completeness, but it doesn't really help us much.

Daily chart

Here's the first thing that brought this name to my attention: The potential 3-bar play that's setting up on the daily chart with that bullish inside bar after the earnings pop.

Hourly chart

Simple chart with 4 levels of interest. Two hourly levels at $121.66 and $116.55, our daily buy trigger at $117.82, and the all-time high mark at $126.59.

This hourly chart is isolated from the previous action because the picture has completely changed after the earnings gap. Anything before that is now irrelevant.

Pre-market action

This pre-market action -especially towards the open- was another eye catcher. ARM has bounced at the $116.55, triggered the daily buy mark and is coming in with very strong momentum into the bell.

The trade

Traded this name with my brother Charls and we had a lot of fun with it. While I did take some entries near the open anticipating moves, I like to keep these posts as quantifiable as possible, so I'll do my best to cover the trade from a systematic approach and avoid wasting your time with my opinions.

Using our CPT Framework:

Cue(s)

• Stock belongs to hottest sector and is still in its early stages

• Recent extraordinary earnings gap with good follow-through

• Daily 3-bar play setting up (and triggering in the pre-market)

• Intraday cue: Buy setup at our first level after holding the open

Plan

Ideally we wanted to see a quick washout at the open to get involved in a potential bounce around $118, which was the daily buy trigger. But the stock never gave us $118 and instead broke the $121.66.

We then got a pullback into the $120 psych. level, which very conveniently matched the opening print for the day. Here's where both of us took our entries. The plan was to hold until there was a reason to sell. We were pretty confident it could make new all-time highs.

Trigger

Buy setup off the opening print triggering

2m chart (entry details)

As with every trade where we're looking to get involved near the open, the 2m chart allows us to get involved in our trades quicker. However, it's important to not get absorbed by this chart. Once in, always shift your focus to the higher timeframes to reduce the noice.

There are 3 potential entries marked in this chart:

The first entry triggers when price trades above the highs of that signal bar that bounces off the open and closes above our $121.66 level. You could use the level itself as risk level, placing your stop right below it.

The second entry triggers when price trades above that textbook bullish reversal bar which is putting in a potential higher low. Your stop would be at the lows of that signal bar.

The third entry triggers when price breaks that inside bar after that bullish hammer that's screaming buy as price tries to break those previous all-time highs for the 10th time. Again, your stop is super tight as you can use the lows of that small range in case the breakout fails.

I've also marked two scalper stops (ST1 and ST2) that I believe were justified for anyone scalping near the open. Both are breakdowns of inside bars that have rejected at previous all-time highs and both lead to pullbacks. Even if you were to take these stops, there were still two entries to get involved again.

2m chart (trade detail)

Stock went absolutely bonkers. I've set the target of these longs at the $150 psych. mark because in real-time that was the “obvious” thing to do. I've also chosen to use a 2m chart again just so we get a better idea of what was going on. You can imagine how the 5m looked.

What's interesting here is that as price accelerated to the upside, price never pulled back below previous 2m bar lows. You could trail your stop as every 2m candle closed and it just never triggered, until that pullback at the $150 mark, which would've gotten you out of the trade at the exact same price point as if you took the exit yourself as price reached that level.

Closing notes

There were a few extraordinary moves in the market this day. ARM was one of them. All the entries were straightforward and the initial consolidation allowed anyone who was watching to take a position with little risk and hopefully capture a piece of the move. The exit in this particular case was also quite straightforward as the trade kept working until that $150 pullback. 

Certainly one of those opportunities that traders live for. If you missed it, you can either feel bad and complain, or study and prepare yourself to do better on the next one. Spoiler alert: The latter has higher ROI.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

Palo Alto Networks is the leading stock in the cybersecurity sector, which as a whole has experienced phenomenal growth during the past few years. I dove further into this topic in a recent PANW post (which I strongly suggest you read), so I won’t waste your time here with the details.

Weekly chart

This weekly chart is as strong as it gets. The trend is clean and looks healthy. The stock has been putting in higher lows, giving itself time to rest before every leg up. We recently crossed the $350 mark and judging by the strong momentum, could very well be headed to the $400 next. If this was a 5m chart you wouldn't be surprised to see another green bar.

Daily chart

The breakout is still very recent, but remember price consolidated for a little over 3 weeks. This last daily bar, despite not being as strong as the previous one, still closed above previous day highs. So either buyers are still in control or there's not much interest to sell this name.

Think about it: Who would want to sell? Sure, there's going to be big players taking profits into strength. But with the stock at all-time highs, everyone who is long is sitting in profit. Why would they chose to sell? Is there a reason to sell? Not at all!

Hourly chart

In this zoomed-in chart we can appreciate how price was rejected at the $370 area and left us with a level at $370.24. We're in price discovery mode as the stock keeps climbing into new highs, so round numbers can often act as resistance along the way. Looks like this was the case here.

Pre-market action

Despite the low liquidity, this pre-market action should catch our attention. Stock is gapping up into new all-time highs. Even on that slight pullback, the previous all-time high level (prev. day high) holds well leading us into the open.

The trade

Using our CPT Framework:

Cue(s)

• Sector leading stock

• Weekly chart in a strong uptrend

• Breaking out of a 3 week long consolidation

• Gapping above all-time highs

• Intraday cue: Price trading below $370 and bouncing back above $370.24

Plan

In an ideal world we'd like to see price retest the $370 area before continuing higher. It's our previous resistance area and we have a level there we can trade off of. The $380 area seems like a logical target if we do get an entry around $370.

If price doesn't hold the $370 we're not interested in trading this name.

Trigger

• Price bouncing off the $370 area near the open

2m chart (entry details)

Straight off the open, price comes down to test our level and quickly bounces to reclaim the previous all-time high mark the stock had set on the previous day. That second 2m bar holds there and sets us up for a potential buy, but it never triggers. Price pulls back into the level and briefly trades below it. This time, however, the bounce looks strong. Buyers are there.

The entries were not ideal unless you got involved near the $370 area risking the lows, which was essentially what we outlined in our plan.

Now, with the benefit of hindsight, looks like that's what most traders did, hence the bounce. After all, it was the straightforward play. Previous resistance turned support.

Despite not offering a clear buy setup, the moment $370 was reclaimed served us a great starter entry trigger, especially as we have a level there that offers us further confluence.

5m chart

Price action was not the easiest on this trade, but at least it starts getting choppy when we're 5 points in the money, so it shouldn't be too stressful. If you waited to get involved on the reclaim of the opening print, I then would agree that the trade was uncomfortable.

Bar 1 is an inside doji bar after those 3 trend bars after the $370 bounce.

Bar 2 is (almost) a double inside bar, which trades below bar 1's lows and bounces back up, setting up another potential entry at the break of its highs and giving us a reference for our first stop trail at T1.

Bar 3 breaks out of that flag and makes a new high of day, but fails to hold and wicks back down. This is not enough to trail our stop, but I still trailed T2 to its lows as this was not the action we were expecting, especially if we took that second entry.

Bar 4 triggers the trailing stop but buyers bid the stock back up and the bar closes strong, creating a failed failure pattern that offers yet another entry to go long at the break of its highs.

Bar 5 triggers that entry but again lacks follow through, leading us to trail again at T3.

Bar 6 is a strong trend bar that finally breaks out of the range and starts this short leg up into the highs of the day.

Price never gets to our $380 target. It starts ranging at the $379s and eventually pulls back, triggering our last trail T4 as it breaks the bottom of the range.

Closing notes

We've been going over a lot of clean price action lately. This is a good example of a setup that met all the criteria to be traded but once in it we find ourselves less comfortable than usual. Buyers lacked conviction after $375. The slower momentum led to choppy action. Sometimes that's just the way it is. 

When trading options, especially weeklies nearing expiration, you can't afford to hold through chop. Unless you're scalping, buying time choosing further out expirations is always a good idea. The stress relief is real, and you might find yourself trading better.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now

Chinese stocks suffered a pretty dramatic downturn after the post-covid bull run. Chinese government crackdown on technology companies was probably the most prominent factor for the case that concerns us with Alibaba.com, but let’s not forget other notable events such as the Evergrande debt crisis and the overall geopolitical tensions in trade relations with the United States.

Those who were trading at the time might even remember that Jack Ma, Alibaba's CEO went missing around November 2020, just when he was about to become the richest man in China. All these factors forecasted an uncomfortable outlook for investors in the Chinese market, and tech stocks in particular.

On February 4th, the following chart started circulating on 𝕏. Bank of America reporting the largest ever China stock inflows in a 4-week period, slightly above $20 billion. This is a powerful statement, which would obviously bring BABA and other Chinese names to many traders watchlists.

Weekly chart

Not much to highlight on this weekly chart besides the obvious crash from the highs. BABA is still down a whopping 77% from its all-time highs. We've gone through stocks that have been down just as much and are making new all-time highs, yet BABA can't seem to gain traction to the upside.

Notice how during the 2022 bear market it didn't suffer as much as most US stocks we've looked at, as it already experienced a notable drop during 2021. Stock has been essentially flat for two years, as every time it seemed to catch a bit of momentum it lacked followed through. Is this a huge accumulation? Feels weird that despite that immense capital inflow there's not much price movement yet...

Daily chart

Price has flipped the trend on the daily after a notable gap up and appears to be flagging, getting ready for a potential continuation move up. That failure to go lower on that last bar right before the news is an interesting cue as well for us to prepare a trade. If the stock can trend above that last days high we have potential to break out of this flag and get a nice move up.

Hourly chart

Things are getting even more interesting as we pull up the hourly chart and plot a few levels. Notice how much room to the upside if we can get above the $72.33 level and trend. It's also very convenient how that level is really close to our daily buy area. More cues to bring this name to our watch.

Pre-market action

This is not the greatest pre-market action but it is really setting us up for a very favourable opening drive play as the stock is set to open right at our $72.17 level, which is our lowest level in that confluence area we'd be looking to get involved in. Despite that downturn an hour into the bell, just like with TSLA, we now have better risk-to-reward potential.

The trade

Back to our CPT Framework:

Cue(s)

• Daily chart structure is potentially setting up for a move higher

• Failure to go lower on the daily

• Relevant news catalyst circulating

• Stock set to open at our level of interest

• Intraday cue: Strong bounce at the $72 area

Plan

Honestly, the plan is to get involved as soon as possible in case we just shoot up from the level that's already holding in the pre-market. The way I'd quantify this to fit our system is to jump in as soon as we trade above this 9:25 bar high. Because we have a few levels of interest in this area, the plan is to split the position in 3 chunks that we can add as each level breaks, assuming this will be an opening drive play. $72 area seems a good level to place our stops.

Trigger(s)

• Price trading above 9:25 bar high

• Price trading above daily buy ($72.23)

• Price trading above $72.33

• Intraday lower high at $72.33

2m chart (entry detail)

Although the trade triggers right off the open, if you were watching this in real-time you'd notice that there was literally nothing going on. And I mean nothing. The stock was just sitting there for two minutes. It was weird, it really didn't invite you to get in. Look at the volume on that first 2m bar and you'll see what I mean.

The moment we get a quick flush below $72 you could immediately see the tape accelerating and size coming in. And here's where all the conditions start aligning. We get a very strong bounce back above the opening print and the daily buy, allowing us to get in more comfortably as we can see buyers are present and bidding with size.

Our risk is tight because we can use the $72.17 level that held twice in the pre-market as our stop.

5m chart

Here's a 5m chart with the stop trails. T1 was after that large wick and bounce back up. T2 is at our first pivot. T3 is after a failure to go higher but never really triggers.

T4 stops us out.

I don't think this was a good stop. You could probably keep a core as the trend hasn't failed. The thing is that when you're in the trade, you've held through 40 minutes of consolidation and the stock finally breaks out, it's a bit of a bummer to see it fail and come back down, so although I'm not advocating this is what you should do, it's natural human behaviour you sometimes can't avoid.

There was another opportunity to either add or go long again a few bars later, but the action was extremely slow and frankly a waste of time.

Closing notes

With the benefit of hindsight, while this day did turn out to be a solid trend day, a week later and price is back around these levels after BABA reported earnings. To me, it still feels weird that there's been so much capital pouring into these names and yet they've barely moved.

BABA is the China stock by excellence, so I'd argue it's a good proxy to get a feel for the overall picture. And as of now, it's not looking too bright. We'll see if this changes soon.

I am posting one trade writeup every day throughout 2024. I focus on large caps using levels and price action. The subscription is absolutely free and will always be. I will strive to provide value by offering clues and ideas for you to enhance your edge. Let’s grow together!

Subscribe now