In this video, learn the 4 reasons this new trader impressed us. A new trader impressed us with a step-by-step breakdown of a trade he made in NVDA. Let’s get to work on showing you how you can be more like this new trader to grow your trading account.
View Video Transcriptin this video learn the four reasons
this new trader impressed us
hi mike bellafury co-founder of sap
capital and we’re a proprietary trading
firm located in midtown manhattan
and i’m also the author of the trading
class of one good trade and the playbook
in this video a new trader impressed us
with a step-by-step
breakdown of a trade he made in nvidia
let’s get to work on showing you how
you can be more like this new trader to
grow your trading account
[Music]
this is a trade i took in nvidia
from august 17th it’s an opening range
breakout trade
i’m revisiting it and uh going back
through it because of recently i’ve been
dramatically narrowing my playbook in
order to
stop over trading and to become more
consistent and this is one of the trades
that i will be focusing on
uh so i thought it would be helpful to
get feedback and
just really dive deeper into it so
starting off with the trade strategy
so the trade criteria to get me
interested would be elevated arbol with
a news catalyst
gapping up at least three percent
institutional ownership
above 50 uh which will help
with some of the buying off the open i
want to see institutions piling in
a strong pre-market level in this case i
use pre-market high
i want to see the stock break above
pre-market high with volume
off the open and for this particular
setup this is before
nvidia had earnings two days before uh
so it helps
in my book to have um the stock of the
history of getting bought up
uh before earnings releases and then
like i said buying pressure
and with the opening range breakout i
want that opening drive
to hit a resistance level have a slight
pullback on shower volume
and then get back above that resistance
level
all above opening print so looking at
the entry
criteria what actually gets me into the
trade um i’m getting in
when it breaks above the opening range
right above that high
it’s important for me to make note that
i shouldn’t chase the entry
and it’s important to get size on this
initial entry
places to add then would be slight
pullbacks on lower volume
only at support levels and then
reasons to sell i would be selling it to
resistance
mistake on that selling when stock
breaks to uptrend from lower day
and then this has to be after 10 a.m and
then i want to get flat when it crosses
below the 21 ema
and that’s a signal of momentum shifting
from buying to selling i like how you’re
working on limiting your playbook being
more specific about it
when we do this with other traders
arvol is
a very important attribute to be looking
at
pass on the trades we talked about this
in your daily report card last night
passing on the trades where arvel isn’t
elevated is very
helpful and then volume
into moves is very important
to see to confirm that there’s a big
order
behind your idea okay so just doing a
quick review of what was happening in
the markets
so this was the start of a week in the
previous week
spy was right below a record high q is
right below an important
272 level and overall tech was showing
relative weakness
we just had some solid unemployment
numbers uh
claims were coming in uh for the first
time
below 1 million since the pandemic
started
in addition there was no progress with
the coronavirus relief talks
which was something that at first the
market was seeming to
ha uh care about and have an impact uh
but later on
uh sentiment was very bullish despite
any concerns with that
and then we’re seeing some increase in
tensions with the us and china
not too important but something just to
have in the back your mind
and then the markets are gapping up
going into the day of the trade
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years of online education so looking at
spy
uh important to note this is in the
summer so we’re seeing lower volume
uh which is due to seasonality uh not as
many people are at their desks and
putting money to work
and we are trading right below the
all-time high important on the
5 day 5 minute we’re holding above 3 35
which has been a support level and we
have been seeing some inside days
from 3 35 to 3 38 so
spy’s kind of ranging nvidia is a
important tech stock a major textbox so
important to also look at cues
the major levels were 270 272
and we’re closing right below 272 going
into this day
and overall tech has since the march
lows techs have been
relatively strong compared to spy so
then the five day five minute
buyer supported 272
the end of last week which was thursday
and then we just had
a inside day right below closing right
below 272.
so the fundamentals for nvidia they have
earnings
on wednesday two days after this trade
uh and this is an important earnings
because it’s the first time their data
center segment
sales are geared to outpace their video
game sales
which shows a full transformation of the
company
that started as video games and now have
gone into the chip business
they have had some price target raises
from susquehanna and oppenheimer
um the most notable ones the highest
ones and
into this they were gapping up to an
all-time high
another piece of news that’s also
bullish is they were in talks
to buy a chipmaker arm which is a soft
bank backed company
i really like how the data center sales
are outpacing the video games right now
and so
the street is looking at this as a
transition different company
that’s going to potentially bring in
more buyers different buyers
more long-term holders really good to be
pointing that out
fundamental to this company are getting
a lot better so just mentioning some of
the
metrics their atr their average true
range is 16.5
average volume is 11.4
another one to mention is institutional
ownership 71
and not much of a short flow at 1.05
i’m doing this trade the our ball was 29
on the open
uh like you mentioned before it’s
important to see that be elevated for a
breakout trade like this to work
and then the high institutional
ownership shows that some institutions
could be buying
leading up into earnings and in 2020
nvidia has
largely outperformed spy so something i
like to do
with all my trades before or after
earnings
or just earnings day ones is look what
they did in past earnings
so looking at the week going into
earnings we could see
about four days before the stock started
getting bought up and in this earnings
it was similar transformation important
earnings because
this was the first time that
the company was starting to see that
their data center
would become their best segment and that
was when
they topped a billion in revenue for the
first time for that data center segment
so the day before earnings the stock
sold off
just something to keep in mind this
wasn’t the day before earnings it was
two before it’s just something to keep
in mind
and on this earnings had double beat eps
in revenue
revenue is up 39 percent year over year
too strong
even with the pandemic and the eps
surprise
um of the actual compared to consensus
was
6.76 which will be interesting moving
forward
a really good job of being diligent
going back and looking at how this
particular stock
traded during prior earnings seasons
love that you’re doing that love that
you’re doing that
something that those that are listening
ought to think about how they can
incorporate that into their preparation
but very well done there thank you it
helps definitely build conviction
and have more context with the trades
which i enjoy
so on a similar note some technology
that
you could use uh this is just in python
it’s not
with our great pie so it is
available to people to try out but this
is some code
that looks at the week before in
earnings
and this right here is downloading all
historical earnings
so this is what i’m using to try to see
if there
is edge in buying a stock
a week before earnings based on a
particular earnings surprise percentage
from the previous earnings and just to
show
some of my findings for in nvidia so
i took the earnings where the past
earnings had a positive earnings per
share
surprise and then this is
a bunch of the charts to see what they
did in the week leading up to earnings
with the last date the day before
earnings
as you can see not everyone increased
but
for what i analyzed you can see that it
does have a history
of getting bought up into earnings and
particularly the days before the final
day before the earnings
uh so this is a project i’m continuing
to work on
for a possible swing trade in the future
uh
but yeah that’s some data to collect and
then
i love how you’re doing that and so
what’s great about that is you’re
thinking outside the box you’re thinking
about how to do something a little bit
differently
you’re taking what you’ve learned and
trying to put it together in a way that
makes sense to you
and remember all the trades don’t have
to work you’re just looking for some
edge
and so yes if you find something with
some edge
that’s great that can be built into a
system and of itself
yes you’re definitely right there so
yeah excited to keep
exploring that so moving on to some
other technology
a lot of my trading is based on how i
can use technology
and be alerted to setups so these are
a couple of filters that i use every day
that would help
for this particular setup specific in
particular setup like nvidia
so on the left is a list
of stocks i watch and just the arbol
they have on that day
and then the atr related move that they
have made
so for an opening range breakout this is
an easy way to gauge
relative strength or weakness as well as
see
what stocks you’re making 10 percent or
a fourth atr move off the open which
could be potential good opening range
breakouts
the second one is just in our ball that
shows the highest arbol
out of stocks for the day and then
moving on to the last one
all the way to the right this is a
similar
uh filter and alert as the one all the
way to the left but it shows
for every stock based on certain
criteria
who’s doing the highest atr move envelop
in relation to their own atr and then
the high
like lowest to the downside highest to
the downside
yeah and look what i’m seeing so far
already
is you are showing
unusual diligence
not going to see not going to see the
diligence
often like what you’re showing us
not going to see thinking creatively
and trying to do something a little bit
different inside of good trading
principles
like what you’re showing us not going to
see
the use of technology
well the way that you are doing it those
are three things
and particularly for the newer people
that are listening those are three
things
that are standing out right away right
now just from the daily chart you can
see it’s been incredibly strong
after breaking out above 320 uh it’s
basically been
completely straight up all the way to
460 in a very short time
and on that breakout above 320 we saw a
high volume uh confirming it
moving on to the hourly just recently it
broke out of a
consolidation above that 470 level
and above 460 in general is bullish
which was a swing high from early august
the five day five minute shows this uh a
little more
in detail a little closer but my
levels going into the day were support
of 465
468 470 472
resistance levels was that pre-market
high that i mentioned in my trade
variables which was
476 480 482
485 and 486. superior
here with your diligence with your
technical analysis preparation
definitely helps i’ve noticed when i
have
time frames aligned and i have more
context
i trade better as well one thing to note
with these resistance levels
is the stock is gapping up into all-time
high
territory so technically there is no
previous overhead supply
so every seller and every resistance
level would be
organic to that day but these are some
levels based on atr moves
and then going into reading the tape i
will
show i’ll preface it this was actually
the day
that thinker swim was down so i
frantically got
up a chart a couple hours after i made
sure i had a backup system
if this does happen again which did come
in handy when it did
so we’re looking at that bottom chart
so the stock makes an opening drive and
we see it hit resistance
around 470 750 was the high
so i’m watching to see if we could
retake this level
so we’re coming into 477 now when it
does
get above this opening range high i
would want to see buying pressure
and i would want to see speed on the
tape increase as well as confirmation by
volume
so we’re now up to 477.50
[Music]
and we’re gonna see very quickly make a
quick
dip back to 477 23.
now i want to see what happens back at
this 477
547 770 level so there’s my entry
now if it doesn’t move away quickly from
price i’m out and i’ll be out at that
opening range high
but we see it quickly breaks through 478
has no trouble there
we see speed on the tape it’s skipping
20 cents 30 cents at a time
and that was that first video and then
quickly
i’m just going to show some tape on a
pullback
that i should have done better
capitalizing on
okay so it’s right here we’re going to
be watching this 482 level
i want to see if it’s going to be able
to hold this level and if it does get a
blow
i would not want it to spend a lot of
time below this level
so about 10 seconds we’re going to see
it dip below
we get to 41.96 quickly re-bid back up
we’re going to test that same level
again
bid held holds to the exact scent
and now we make our move back this was a
spot i didn’t add on
but noticing that failure to hold below
a support level
and that quick rebid confirmed by
speed on the tape after it got back
above 42 would be a great pullback spot
to add
and you can see it quickly moves to 43.
and just to skip ahead we then continue
going higher
all the way to 485
we suggest people find a way to
clip reading the tape examples into
their playbooks
so they’re better and they can learn
more from them
and not everybody does it and
another example of superior diligence
from you
to put it into your playbook trade so
going into
my trade management for this
one thing to notice is that the stock
did break above the pre-market high of
476
on the opening drive so that’s a check
in my favor
my entry is three lots when it breaks
above this opening range high
as you can see right there and then i
would be risking a move below this
opening range high
my first sale would be half a tier into
strength on a break above 480 resistance
level
and at this point the stocks moved about
four points so about
a fourth in atr as well for my system
i use atr and i have it up on this top
left corner
as a reference point just to have in the
back of my head where i should be taking
profits
but then using the resistance levels as
my actual places
get long three lots when the stock
breaks above opening range
you’re gonna have more success when the
consolidation after the opening
move is longer and tighter
there’s yeah there’s if there was more
time
that had gone by and it gone sideways a
little bit more after the opening drive
the more success you’re going to have
with a stock like this
my sense is that this is a potential
long right here uh
not three lots though because it doesn’t
go sideways enough
so my next sale is then into 482
we see it to 482 uh it has a slight
pullback
quickly then continues with the uptrend
but this is a good spot to take off some
size
then i would sell one tier into 45
at this point this is about half an atr
move for the stock
and like i showed on the tape
where i’d like to add would be at this
482
50 482 level so
going into my trademanage i want to
think about how i do look at trades and
i have this
as a support level this 4250
so what it pulls back and holds above
there i would add half a tier
but when it continues pulling back i
would want to see how it reacts at this
482 level and on that quick rebid back
up
which confirmed strength couldn’t hold
below the level i would like to add back
another half a tier
yeah that’s actually a pretty good
consolidation there between that 482 and
484 that’s a better consolidation than
how you added initially for the three
tiers
definitely right that could be a good
place to get size
where instead of be like long one tier
and then get another one into this area
one thing that’s important with these
pullbacks
is just to be patient and wait for the
confirmation of the pullback and have it
be
at an important level where i was a
little early on
it um at 482.50
i added that because that’s a place
where it did find support it was a
support level
but however the ad at 42 is even
stronger
as it holds above the 21em ema as well
as holding
that level so then i would sell half a
tier at 46 like i mentioned
and now moving into my reasons to get
out
i would sell half of the position when
this uptrend
from lower day breaks as you can see
this is a very extended move
as you can see from the distance from
view up
to the high of the day
so at this point i would want to not
have to
sit through an entire pullback back to
42 44.
uh so i would sell half there and then
get flat when it closes below the 21 ema
which is a signal to me that
the momentum is drying up and buying is
getting
exhausted so those are my executions
just for you to think about in terms of
best trades
stock doesn’t go down in the open starts
to tick up to play that first opening
drive
is something for you to be thinking
about right away right on the open
yeah where you got in where you got in
is
is fine uh as a momentum trade
that consolidation 42 44
good place to be thinking about
i’m not sure it makes sense something
for you to think about and i i won’t
provide a definitive answer but if
you’re saying to me hey i think
something is too steep and i’m going to
wait for something that’s too steep to
break that that down
trend that’s fine but i would also if
for me
i would have a system to exit if
something got a little bit too
parabolic if it got a little bit too hot
so i wouldn’t just look for it to break
a downtrend that was too steep i’d also
have a system where i was selling into
something that’s too strong that’s a
that’s a very good idea
that i should think about i didn’t
mention this we had the volume increase
when it rejected 490
at this level so that could be a spot
that would show that over extension
so then just going into my trade review
uh
i asked myself a couple questions uh to
facilitate the review
just stuff to think about so the first
thing is with this
trade what way did the stock trade that
made it successful for me
so the buying was clear off the open it
respected
levels very well and
this setup doesn’t have a lot of draw
down
included buyers step in immediately
and i’m quickly in the money which just
puts me in the driver’s seat and tells
me that the setups right
right away and then the specific setup
the opening range breakout
this is a setup where i can nail the
entry and i’m
getting prices at some of the best of
the day
and like i said to reiterate it’s very
clear when it’s working
and it’s also a simpler setup i would
say for
newer guys like myself to really
capitalize on
and then aspects to add one thing i want
to really
start doing more of is thinking through
the psycho
psychology of how people are long and
short how they’re positioned
before and after earnings reactions
um and i would like to find a way to
quantify institutional ownership
to see if that could have an edge
with these particular setups to see how
many funds
are getting into a position or getting
out for
week setups and then i’m going to
continue working on that code
for a potential swing trade and then
with the tape i could definitely improve
on where to add
on that pullback and with this setup
the main areas to use the tape would be
the entry and the ads
as well as um like you said if i do
include
selling it to strength a little better
and it’s just important for me
to really continue watching tape
and dialing into these key
areas in flexion areas yeah i’m really
impressed
i really liked at the beginning how you
really knew what you were looking for
very systematic about what you wanted to
see
for the particular trade very high
diligence
for how you laid the trade out
how you reviewed the trade in terms of
your technical analysis
putting the tape into that you know
really superior
creative thinking for maybe how you’re
going to use data
and then even in your post review how
you’re thinking about
you might want to actually look into how
the options were priced
and how the options betting was right
before the earnings
that’s something that that that might be
something we can talk about offline
uh if if you want and then
you know really good use of technology
so
you know when i see a trade like this
i’m not as concerned about how you
traded it or how you did or how much you
made
you know what i’m seeing is really great
work being done in a trade you should be
practicing
you know what i’m seeing is the type of
work that’s just better
that’s just better than lots of other
traders even here
it’s just better and so
i would encourage you to keep
building from the diligence in your work
the creative thinking the use of
technology
and uh and keep at it hey go ahead and
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