Trade Reviews - $WMT $SPY $FEYE $NFLX

The purpose of this post is pretty simple: I wanted to share some recent trades of mine with the hope of you learning something helpful (there's also the selfish reason of self-reflection and to journalize my trades but you don't care about that). The trades I'm going to review are all shorter term swing trades (I will further explain below what exactly that means).

The first trade I'm going to review was a trade I made yesterday (2/20/15) in Wal-Mart on the open. I was watching $WMT as a Second Day Play, as it had gaped down the prior day after reporting earnings. I was watching the longer term support area at $82.80-$83, which you can see on the daily chart below. The stock gaped down again on the open on Friday but was trading right at this support zone. I thought there was a low risk entry at this support zone for a move back up $84-$84.30. As you can see on the 1min chart below, I got long at $82.72 with at stop at $82.47. I thought $84-$84.30 was a reasonable target based on the prior day's failure areas (5min chart below), which represented over a 5/1 risk/reward. I sold most of my position intraday but held a quarter of my original position size as a swing.

Note, this isn't a long-term swing long for me; it's more of a "tactical" swing, where I used the shorter term time frame to execute my trade (risking 25 cents in this case) and then look for continuation in the coming days. I'd look get flat on another 1-1.5 up move.

$WMT, daily chart

$WMT, 2 day 5min chart

$WMT, intraday 1min chart

Before moving on, I want to emphasize a technique I've been trying to implement into my trading recently, a technique I co-opted from @sspencer_smb. Stated simply, I've been identifying important  "inflection points" (support/resistance levels) and then have been using the shorter time frame to execute my trades and to better control my risk for multi-day continuation patterns (hopefully, this makes sense). The next couple of trade reviews should help to explain this idea further.

The next trade review is for a trade I made yesterday in $SPY (the S&P 500 Index ETF) on the long side. The trade was a simple Technical Trade. There was intermediate support at $208.70-$209. I bid $208.73 with a 30 cent stop, and I was lucky enough to get hit with a LOD print ;) As you can see on the 15min chart below, I then scaled out of my position into $210-$210.30, which was the top of its three-day range. $SPY then proceeded to move up another point from there and closed at highs of the day so I decided to hold a quarter size position as a swing.

$SPY, 15min chart

Again, notice in this particular trade, I used the shorter term time frame (a 15min chart in this case) to determine an "inflection point" that represented a low risk entry - over an 8/1 risk/reward in this particular case.

The next trade review is for trade I made in FireEye on Thursday morning (2/19/20) on the long side. $FEYE reported earnings late last week that were above the consensus ($-0.64 vs $-0.83 estimate), and the stock proceeded to break out of a multi-month base going back almost a year, which you can see on the daily chart below. I didn't play the initial break above the $42 resistance level, but I marked up my chart with "inflection points" that I thought were realistic support levels that represented reasonably low risk entries. You can see all my trade management in the charts below.

$FEYE, daily chart

$FEYE, 15min chart

The final trade review to wrap of this theme of "inflection points" is a trade(s) I made in $NFLX. As you can see on the daily chart below, $NFLX gaped up after reporting earnings that beat the consensus estimate ($0.72 vs estimate of $0.44). After the initial gap up, it then proceeded to run up another 50 points or so...and I missed the entire initial run up! But, once again, I looked for inflection points where I could enter with minimal risk and catch the second leg up. The reason I like this example from an educational perspective is because of all the positives stacked in its favor: 1) It had a strong fundamental catalyst behind it (63% earnings surprise); 2) Strong price action; 3) Very low risk entry that offered over a 10/1 risk/reward.

As you can see on the 30min chart below (1 of 2), I marked up $434-$435 as my inflection area; this was simply a prior consolidation/support area. On 2/2/15, $NFLX was down with the market but it was coming into this potential support zone. I got long at $434.60 with a stop below $433. I had intended on taking a quarter off at $440, and it bounced up to $444 that day, but I was off the desk and forgot to put in an offer and it retraced a bulk of that intraday up move by the time I got back (oops). But as you can see on the charts below, I proceeded to scale out into prior resistance areas. My most recent sale price was $480.37. I'm basically flat now (but still long), as it's exceeded my upside targets. At this point, I'm just holding out for a $500 print ;)

$NFLX, daily chart

$NFLX, 30min chart (1 of 2)

$NFLX, 30min chart (2 of 2)

Again, the reason I like this $NFLX trade so much is because of the numerous factors it had in its favor: Find a strong stock, zoom in on the shorter time frame to find a low risk, potentially high reward setup, which can either be a simple intraday trade or a multi-day swing trade. This can work very well for earnings plays after the initial thrust when looking for follow through over the coming days or weeks (a la $NFLX trade review). An example of a similar setup I was watching that never played out was in $AMZN, as it never gave me that pull in I was really looking for. Can't catch them all!

Please let me know if you have any questions or comments.

StockTwits: @MarketPicker
Twitter: @Marketpicker

Disclosure: Relevant Positions - Long $WMT $FEYE $NFLX $SPY as of this writing.

Plain And Simple, I Broke My Rules – $USO

You must be living under a rock if you haven’t heard about the drop in oil, which has been cut in half since the latter half of 2014. The financial media can’t get enough of its story.

I bring this up because I wanted to share a pretty big trading-related mistake I made recently not only for self-reflection but also helping you avoid the same mistake in the future.

I got long $USO (the United States Oil Fund ETF, which is meant to track the price of WTI crude oil) in mid December somewhere below $21.50. I had a very small position (quarter size) and my stop was roughly a point. I planned on adding to my position if I saw signs of strength. I initially got long because of what I viewed as signs of a short term bottom as it started going sideways after retesting lows, fulfilling my own prediction for 2015 that people will continue to try to catch the bottom in oil (catch those bottoms!). I ultimately got stopped out for a small loss about a week later. While I defined my risk and reduced my position size due to the lack of bullish technical signals, looking back now there was no reason to have gotten long, at least not to for my standards. At the time, USO was still trending down and was below all of the major moving averages I use (on a daily chart) and couldn’t even close above even the shortest duration moving average.  It was clearly still in a downtrend. Plain and simple, I broke my rules.

Another, perhaps worse, mistake I feel I made was that I let the noise wrongly influence my trading execution. A cardinal sin! I read countless articles about the collapse in oil as the financial media met my insatiable appetite. I read about supply-side factors, demand-side factors, future capital expenditures, potential effects on the economies of Shale states (the likes of Texas, the Dakotas, etc.), rig counts, this, that, and a little more this. “Oil can’t go much lower” Wall Street analysts and economists seemed to collectively guarantee. It wasn’t as if I said to myself, “OK, these Wall Street analysts say oil shouldn’t go much lower so I must buy.” Instead, I think I subconsciously let others’ views negatively affect my own trading behavior, looking for even the slightest bullish sign in something that was in a strong downtrend. What a piker move!

Which brings me to the point I wanted to share when I first started this post: You may have this strong belief or thesis about a particular asset class or a specific stock due to your own proprietary research or economic forecast. But are you really able withstand the time between the ostensible disconnect between the market and your belief? As Keynes simply said, “The market can stay irrational longer than you can stay solvent.”

Just a bit of clarification, I’m not advocating you eschew fundamental analysis (which foundation rests on finding market discrepancies in value and price, more or less). In fact, I think some of the best traders use a combination of fundamental and technical analysis. But again, I stress (at least my belief) the importance of waiting for price to truly confirm your thesis before acting. The risk/reward will comparatively be so much more in your favor if you do so. And be sure to not let your underlying thesis cloud your objectivity of the unfolding price action (e.g., trying to call those illusive bottoms in oil).



Related Reading: My friend and fellow DRC author Tom Bruni shares what he’s seeing in oil. 

Please let me know if you have any questions or comments.

StockTwits: @MarketPicker

Twitter: @MarketPicker 

Disclaimer: No relevant positions