In this video learn how to spot trading signals right on the open to catch huge stock market trades. We share in step by step detail a trade in Federal Express generated from a powerful trading signal you can learn to make highly profitable trades.
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in this video learn how to spot trading
signals right on the open to catch huge
stock market trades hi I’m Mike
bellafiore co-founder of SMB capital and
we’re proprietary trading firm located
in midtown Manhattan and I’m also the
author of the trading classic one go
trade and the playbook in this video we
share a step-by-step in detailed trade
analysis of a trade we made in Federal
Express generated from a powerful
trading signal that you can learn to
spot to make highly profitable trades
[Music]
so this was a trade I made the other day
in FedEx we call this a dr. s trade for
reasons that I’ll explain in a little
bit but this was a retracement after a
high volume after heavy volume right on
the open so the trade idea behind this
is that there’s heavy and elevated
institutional selling right on the open
after a significant gap down showing
that institutions are dumping the stock
which helps to set the tone for how the
stock may trend lower for the day okay
so the big key for this is we’re seeing
heavy volume right away right on the
open which indicates that big money
traders
big players institutional traders big
hedge fund traders they are putting a
lot of money to work into this idea
right away and what this is doing is
this is signaling and leaving a
footprint that these big-money traders
they really want into a position if the
move is up but they really want out of a
position if the move in this case is
down they really need to sell that heavy
volume that heavy selling is signaling
to us that there’s a lot of inventory to
move and because there’s such heavy
inventory right away on the open right
away in the open all right that is
leaving a footprint that this
potentially can be something that can
close low Loveday this potentially can
be something that can be lower two three
days from now because Big Money traders
can’t sell all of their inventory in
three minutes or five minutes or six
minutes all right but the fact that
there’s more volume in this three minute
period or five minute period or six
minute period right on the open relative
to how much volume is done in the same
stock at the same period of time you
know so if there’s three times as much
volume done in the first five minutes
right on the open in FedEx or ten times
relative to how it normally trades
that is giving us a signal that is those
are footprints from the big
institutional traders that we’re picking
up on that can signal hey they’re gonna
sell this thing for the whole day hey
they’re gonna sell this thing for two
three days these peas guys need out they
won out okay and so that is that is
something that’s and we can do this long
we’re gonna do this on the short side
but we can do this long and short so
that’s like the main overarching idea in
terms of like the specific play um we’ll
see price end up pulling back into view
op and when it’s unable to make a
meaningfully push and hold above me
we’re up again I’ll let you speak for
like 30 seconds I’m gonna interrupt
again okay so let’s just get our
vocabulary down let’s get on the same
page okay when something goes down and
then so this case FedEx tanks on the
open goes down four points and then
moves back up to the V wop area that
move back up is called a what okay it’s
not called the pullback and that’s why I
want to get out what is that called in
trader parlance thank you it’s called a
retracement okay and so if something had
been really strong and got out four
points and then traded try to trade it
traded down into V watt that would be a
pullback and so once we see sellers
reestablish control again price get
below Viwa the stock should trend in the
direction of the opening drive this is a
trade to hold for a longer intraday or
potentially multi-day move and just as
like a footnote just risk 10% of your
intraday stop per tier good I really
like how you do that I like how you are
identifying the trade and identifying
your risk I would encourage you to do
more of that so on the big picture today
there wasn’t any news on the China trade
front or brexit house was doing some
stuff with the impeachment but the
market
wasn’t really reacting to this we were
seeing that the market as a whole was
just in arranged for the day so intraday
fundamentals um so since they were
reporting earnings their EPS missed
significantly 2051 cents versus 284
sales also missed below the estimate at
17.3 billion versus 17.15 7 billion
their forward guidance was also lowered
significantly below the estimates we see
this also is coming on the back of some
amazon news that the third party users
are now going to be prohibited from
using FedEx as a distributor two days
earlier and then also earlier in the
year I’ve gotta interrupt again
apologies prior I put all that red in
there these earnings are not good this
is a big company it’s not gonna be a
good conference call for these guys
Misun EPS guide lower for the full year
missing by a lot and now you know
essentially they’re gonna lose lots of
sales shipping for Amazon and for third
parties using Amazon as well that these
are these are terrible numbers and so I
have some of the levels written down the
ATR on this particular day for the past
couple of days it was been just over
four dollars the average falling is
about 2.8 million our wall today was
particularly elevated at over 8 the
short float is about 2 percent the
overall float is about 240 million the
institutional ownership is 72.7% ideally
we’d like it to see how we’d like that
number to be higher just because that
would be an even stronger check for the
direction of the opening drive and then
the retracement and on this particular
day the stock was getting down about 7
percent in the pre-market if you want to
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couple of hours from this trading
workshop than from years of online
education and so you can see here on the
daily chart um FedEx has been trading
kind of sideways for the past year and
now we’re starting to get below some
important technical levels those levels
will be important for taking trades
during the day and you can see on this
five-day chart how significant the
sell-off was as a result of their
earnings and then it’s just a 5-minute
chart and then a 1-minute chart and so
given the backdrop of this trade you
always want to have reason as a sell
before you even think about getting in
so the idea of this retracement is that
one sellers really established control
and able to get price back under view up
the stock should trend lower therefore
your reasons to sell should be when the
stock stops trending lower so for me
personally um when I see a stock that’s
greater than half an ATR away from view
up with buyers stepping in that can
usually be an indication that the stock
may be bottoming for this particular
setup that I’ve been working on I find
that it works best when it’s between
three quarters in a full of an ATR away
from V Wahb but the logic is still valid
if it’s half an ATR away from the view
up and then just relating this back to
the trend lower if it makes a meaningful
higher low that can be a place to cover
some risk and then when it makes a
meaningful higher high that can be an
indication to you that the trend may be
over for the day so in terms of trade
management we see that institutional
sellers step in right on the open with
elevated volume showing that they’re
interested in selling this more despite
the gap down this also shows us that
institutions are likely likely aren’t
able to completely get out within the
first few minutes and like as a result
price may drift back higher and when it
does that might be an opportunity to get
short for an expected move lower for the
day and then we see that price pops back
into view up but isn’t able to really
push or hold back above that level and
we can see that we were getting up to
this like 1050 area weren’t really
pushing higher showing us that sellers
were still in the
trade and yeah that shows us that buying
pressure really isn’t substantial enough
to hold the price up therefore once
these buyers step out of the way the
stock should fall back and retest the
lows and potentially okay
so two points we got to highlight again
the thrust to the downside how would you
describe that intense good the volume
elevated good that is what we’re looking
at that sets up the short on the
retracement and failure at view up so
yeah you could get short Tier one just
risking against 150 and this 150 one
area what really projected from right on
the open and then as you can see we
start to come back up here into this
little consolidation or yeah and one
point about that bu op right there which
is where early in the day the move to
the downside is really steep so when we
retrace back up to view op we have to
understand that it’s very possible it
can leak through B what it’s so young in
the day that B WAP indicator is not
going to be as reliable as if it was
later in the day the steepness of the
move makes for its stopping right at V
WAP and not leaking above it less
reliable as well so we have to game plan
for could just leak through there and
then roll over and be cognizant of that
with our pricing good so after we get
that initial push back down we do see a
little elevation and volume that can be
an area to short once it does pull back
on lighter volume retrace a little bit
here and lighter volume so you can get
short tear to there risking back above
Viwa the thesis is that the stock should
go back down retest the lows therefore
view up should not be reclaimed if your
thesis is still valid
once out that I particularly like is
when it makes a technical higher high ah
still holding below view up where it
makes a high and then it makes another
pivot high usually triggering some stops
by people who are getting short in this
area so I find that this is a pretty
reliable area to get short for it tr3
risking again back above you up yeah and
so the
I look at markets the way the the short
that I liked the most out of all of the
shorts
was it retraces back up the V wop and
you could see there was a little bit of
a battle around that V wop area you can
see the seller holding it up and a
little bit of a range was created and
then it got below that range aggressive
short it hit it go after it get after it
risk on when that range broke right near
that V wop area when that range actually
had held up a little bit and sublime had
been done in that range I think that is
a risk on tier 2 tier 3 tier 4 study
area for trading as well and then so we
can see that it breaks the morning low
right around in here not only slightly
increased volume but since there isn’t
great immediate follow-through on to the
downside after this break of the morning
low for me there wasn’t an ad in a
situation like this where you are trying
to find places to add you do want to be
selective and when you do find the
places to add you really need to add
size but for me I wasn’t looking forward
ahead once we broke the morning low
thought for you when we’re making
significant new lows and you think that
that’s particularly when you have a
thesis of hey this could finish low of
day or hey I think this can finish low
of I think this can go down for three
days one would make a significant new
low you can think about adding a little
bit of risk to that trade by shorting
pops and then setting your stops above
those those last consolidation areas I
like to add risk when we’re making
significant lows when I have a higher
time frame trade on and if you think
about it doesn’t really make sense not
to add risk when we’re making new lows
or we’re making significant new lows if
you’re holding from these higher levels
and not
during when we’re making new lows and
it’s making new significant lows and you
think something can go low of day and
there’s confirmation and the price
action that your idea is playing out how
does it make sense not to put on more
risk of course it does so when you see
it when there’s confirmation of your ID
your idea those are always the best
trades right and so that’s hard to do
right but you have to be thinking in
your head what’s the big picture of this
trade what’s the big picture for this
trade what’s the big picture is this
trade which is low add a low add a low
add a or lower in three days that helps
you to put on that extra risk at these
much lower prices than you initially
started your short go ahead so for me
something that I’ve been testing out in
terms of taking size off would be once
it gets too extended from B WAP um this
is again just an idea that I’ve been
floating around but once we get down
here and start pushing past half an HR
away from Veet WAP and we do start to
see some buyers start to come in start
to try to hold up price a little bit
this can be an area maybe the size off a
little bit
volume wasn’t great as it was making a
new low a day but time of day is also
around midday so the logic here is that
it might not be able to push much lower
given how steep the descent is it was
still possible but we were starting to
see some buyers come back and so this
could be a signal that downward downward
momentum may be stalling so this would
be a place to cover for me personally
and then as you can see throughout the
5-minute we do start to make like
meaningful higher highs signaling that
the downtrend may start to be fading
it’s not necessarily a signal that the
stock would correct and maybe somehow
get back above the Waffen finish at high
day or anything like that but it is a
signal that on downward momentum is
slowing and that buyers are starting to
accumulate at these prices so once it
does start to make a higher low this
would be a place to risk off and then
coming into the end of the day we do get
this quick pop up above this once
14750 area which does make a meaningful
higher high but we again work back
weren’t able to get back
this technical level this is when your
judgment can come in if you want to
cover with if it does make a meaningful
higher high or if you want to hold it
into the clothes but for me personally
when I saw it it make this pop like this
I thought that the momentum was
continuing to the upside yeah just work
on when you see something make a
significant new price I when something
is is down like this if you can you then
want to try and risk off into the pullin
into the pullback as opposed to paying
the price above that resistance area
that that’s when you want to cover into
the pullin yeah I should have been a
little bit more patient and just let it
really show myself yeah so for the trade
variables they had a triple mess on ER
earnings EPS sales and forward guidance
they were gapping down greater than 5%
which is something that you want to see
if there is a triple miss test its daily
level now for like the seventh time and
it’s now breaking the more times attest
the level the more likely it is to break
so given that this was the seventh time
it was much more likely to break and
when it did we did see it give out it
was also one of the highest volume days
of the year which is something that you
want to see in a stock that’s breaking
down from such an important technical
level and then you see significant
selling right on the open below the
important technical level setting the
tone for the day something else to also
note was that it never traded above vo
up and never held about there for a
meaningful amount of time which could
lead into further days of trading this
by showing you how weak it was
throughout the entire day alright good
go back to that slide yep and just want
to highlight significant selling right
on the open elevated volume right on the
open leaving footprints that this can be
something that is gonna trade much lower
than that initial opening drive okay
good and good job with you variables
here good trade for us to be studying
and thinking some more about long and
short so now it’s your turn what did you
learn from this video that’s gonna help
you make profitable trades in the future
let us know by leaving a comment below
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