In this video, learn how to make a quality Breakout Trade in the hottest stock in the market -Tesla. Two firm traders break down in step-by-step detail their profitable Breakout Trade in Tesla. Let’s get to work on sharing these important trading lessons so you can grow your trading account.
View Video Transcriptin this video learn how to make a
quality breakout trade
in the hottest stock in the market tesla
hi i’m mike bellafiore co-founder of smb
capital and we’re a proprietary trading
firm
located in midtown manhattan and i’m
also the author of the trading classic
one good trade
in the playbook in this video two firm
traders break down in step-by-step
detail
their profitable breakout trade and
tesla let’s get to work on sharing these
important trading lessons
so you can grow your trading account
[Music]
so this was the stock split news
breakout in tesla
so big picture uh the day before in the
after-hours tesla announced a
five-to-one
stock split and that caused the stock to
surge eight percent
immediately uh in after hours this
followed the lead of apple which
surged ten percent after announcing a
four to one split with their earnings
report
uh two weeks prior good now that’s a
good job actually comparing it to how
apple did previously
in a strong market you’re going to see
commonalities like this
lots of stuff works in a really really
strong market
analysis or just checks like what you
just mentioned right there
is going to work so good job there yeah
absolutely
and so this is going to mean that the
tesla share price
uh would drop 300 to like 350 per share
and that makes it a lot more attractive
and affordable to
retail investors moreover
this morning the pre-market volume was
four and a half percent of average daily
volume
which is pretty high uh usually above
three percent
is kind of an indication that we’re
dealing with something that’s going to
be very in play
and then when tesla opened up our ball
was immediately at 20
also very good and then by 10 a.m when
we were looking to
enter the trade arvol was still holding
it too which is also very good
hey is there a certain arvol that you
guys like for these high beta names
i think above one half or two later in
the day
and then open our ball above 10 is very
solid
uh below that it tends to be a little
questionable
so big picture uh spy of course has been
grinding back
to yearly highs over the last five
months ever since botting him out
bottoming out in march on the fed
unlimited qe news
you can see that we are in a high time
frame uptrend holding above the 200
daily moving average
and then also holding above the yearly
v-wop
the tech sector with nasdaq has been in
an extremely strong
uptrend uh holding well above the the
200 daily and the yearly view
up and we also threw in uh that uh
on this day specifically we weren’t
really overbought necessarily on the
daily the daily rsi was only
55 and you can see that we didn’t really
we’re not really forming short-term tops
until that rsi gets overbought above 70
and so
um we’re not looking to we’re looking to
buy breakouts in tech stocks still
um we’re still you know leading to the
buy side with this tech rally so if rsi
was above 70
different trade for you yeah i think
that would mean
we would be less willing to look for a
breakout and more looking to
short really overbought tech stocks
okay good um so tesla on the one year um
was uh interesting to us because it had
pulled back
20 over 20 percent from its highs after
releasing earnings
but again very strong uptrend this going
back to
october of 2019 this is one of the
strongest stocks in the nasdaq
a very very solid candidate for buying
breakouts
so on the monthly chart this is a 30
minute chart going back one month you
can see that
uh tesla had pulled back 20
after reporting better better than
expected earnings
uh so we kind of got to sell the news
effect
over the last uh 20 trading days or so
and then on this morning what was even
more interesting was that
we spiked up in the after hours and
topped out pretty much exactly at
earnings day low and the anchored view
up from its earnings day so
this 1480 level that we were opening
below
was a very critical inflection level we
felt um
that that if it were to get above this
level we could have a very significant
breakout
on our hands if you want to learn three
real world setups that our traders use
including the simple setup that we teach
all of our new traders
and the setup that turned one of our
traders into a seven figure big money
earner
check out the free webinar that we’re
currently running just go ahead and
click the link that should be appearing
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in the new window so don’t worry you’re
not going to lose this video
you’re going to learn more in a couple
of hours from this trading workshop
than from years of online education so
our game plan this morning going to the
open
we saw that there was a very clear 1477
level in the pre-market
so we kept it very simple we were
thinking okay
if tesla gets above 1477 on volume on
the open we’ll look for an opening drive
to
trigger this trade otherwise if we can’t
get above 1477
then we wanted to see a pattern form on
the open of
at least 15 minutes ideally like 30 30
minutes to an hour even
and then we trade that breakout as a
trigger for
for this trade so here’s the entry um
tesla on the open you can see
uh right at 928 we spiked on the
imbalance
and that was the morning high right on
the open we sold off um
quite substantially and ended up
consolidating for about half an hour or
so
and then right at about 1005 um we got
that big ignition bar
through uh through the open price uh and
that was what triggered us to get into
the trade so
um here what we did was we entered
uh a core position on our joint account
um with a bit of a wider stop
uh and this uh this core position was a
trade to hold so how does that work so
you guys do a joint account
how do you decide what to put into a
joint account do you talk about it
before the breakout
you talk about who’s going to actually
execute how does that work
yeah absolutely so we we game plan ahead
of time if this is going to be a
position that we would consider putting
on
on the joint or not and of course
something that qualifies to be on the
joint is something that we’d be looking
to potentially hold all day because
the five-minute time frame of the
15-minute timeframe is indicative of a
potential intraday trend so
we chat about it of course before the
open we understand what stocks we
potentially want to put on joint
you know obviously we’re on the headset
all day and when something sets up like
that we know that we need to be putting
something that we can look away from
putting some risk on against that under
you know understanding that there is a
potential you might get a full atr
move um and and so one of us will will
immediately have
a trigger to put that risk on and
at that point we can both focus on our
individual accounts and getting in
and being nimble with the with the other
side so it’s got to be an a plus trade
for you guys to put on a
trade in a joint account yeah the joint
account is is
is is really meant for the trades where
i can
we can risk quite a bit of our intraday
stop
on that account because we feel as if
that account
needs something where where you are
using a wider stop therefore reducing
your rr
but having a high confidence setup a
high confidence setup we can put on
a lot of risk but feel comfortable with
that risk because you understand that
you’re going to be able to sit through
that noise
which is of course important to do you
know if you’re looking to hold for
for a trend move is to be able to sit
through some noise and look away from
that
okay great in addition to entering that
core position we also uh
put in momentum size uh with the tighter
stop only a seven point stop
um we use the two minute bar breaking
bar low
uh for for that stop and our target
also for that momentum size is only the
measured move
uh of that pattern and if we see it
stall before that will even be
be quick to to get out of that the
momentum size is
is not a trade to hold it’s just a size
where we can be
a lot more heavy and decides that we
don’t really want it to go against us
very much
so that pattern target for the opening
breakout that measured move
ended up forming it ended up topping out
there
um nearly perfectly for for a
short while and so we ended up covering
most of our momentum shares at 1505.
yeah you’ll see that in a stock that is
one of the strongest stocks
in the market you’ll see that with
when the market overall is really really
strong so you get the two of those
combined with this situation and you’re
going to see things make a lot of sense
absolutely with the core exit um what we
want to be doing
is holding with the trend but also
taking some size off
at different daily time frame resistance
levels
and so before the trade we had
pre-planned
some daily resistance levels uh 15 17
15 34 and 15 64.
and uh the game plan for the exit there
is to take off a little bit in front of
each daily level
and then when we see a something that
looks like a failure at that daily level
or a high volume turn at that
at a daily level then we’ll look to take
off full size so
at 15 17 we took off a little bit at 15
34 we took off a little bit and then
when we had that over extension above
1564 and then failure back below
uh on volume that’s where we covered the
full position
how do you guys feel about piecing out
of profits
along the way the thesis overall here is
this is something that could finish high
a day maybe even gap up the next day
i take it and yet you’re you’re peacing
out
yeah i mean a big mistake with this
trade honestly was taking off too much
too early
i think we ended up taking 50 off uh
at that first daily resistance um i mean
it’s tough because uh you know you don’t
want to give back a lot of unrealized
unrealized profit and if you say
oh i’ll trail versus the last five
minute pull back low then
you might see you know yourself get back
over 50 percent of your gain
so i think taking a little bit off at
each daily
resistance and then you know taking full
off when you see a
high volume turn uh turn is uh
kind of the right the right mix where
you don’t give back too much
of the unrealized and then you you can
stick around for most of the move
so here are our executions um you can
see that
we had a lot of executions on on the
breakout uh
because we were entering in both of our
our our personal accounts and our joint
account
we ended up taking a good amount of the
personal shares off on that first pop um
and then we took off the rest uh into
that 1505 1500 area
and then we were just scaling out into
the uh into those daily resistances with
the core position
well look i gotta i gotta ask a question
here so why do we do these playbook
trades
so that you can repeat um best practices
for
when this happens again i mean we we got
yes
what’s going on literally and i
appreciate you guys actually doing this
at this point right
in time because what’s going on right
now as we’re talking about this
tesla breakout different prices
but you guys are in the middle of a
breakout trade right now
in tesla correct that’s correct you’re
literally right in the middle
of the breakout trade above 1900 now
it’s up towards 2000. you’re making a
very very similar trade today
based on some similarities between what
we’re talking about here is that fair
that’s very fair that’s exactly right
yeah and so that’s why we do these
playbook trades
and so i’m sure you’re going to flip the
slide and
talk about what you can do better
and along the way i’ll give critical
feedback as to
where you guys could have done things
better and we talked about hey should
you have taken off profits where you did
and that’s an open question for you guys
to decide but
really the most important thing
for the new guys listening and the
developing guys listening is
you are building your business and the
idea is
for you to understand what your business
is going to be and then
have the infrastructure to do it better
to have the techniques the learning
techniques
to do it better next time and so
for you guys after the close today
you need to be going back and asking
yourself a very simple question
did you trade the breakout trade and
tesla today
better than what she presented here
and if you did that’s terrific
that’s what this is all about that’s
that is that is tremendous
progress and then the next time it has a
breakout
same question did you do it better than
the next time it’s not realistic i’m
sure there’s people that are sitting
there saying oh if i just bought a
thousand shares
when tesla broke out above 1895 and 1900
i would be up
xyz you know if i just would have done
one two three abc i would have made
so much more money than i ever had made
that’s not the point the point is
to rise the bar to move the bar up
to move the bar up a little bit each
time so that
you guys are making more money and i
will of course query you guys after the
close to ask you did you make enough
money
in this particular tesla breakout today
and i know you’re on the
on the horn with max talking through it
and i’m sure
i’m sure i’m positive i don’t even need
to ask this question before i get the
answer i’m sure you guys are going to
sit there and say i should have made
more money
but really the the question is did you
get better from this
presentation that you guys just did did
you did you get better with this
breakout trade in a high beta name
the hottest stock in the marketplace and
if you did
you’re getting better as a trader your
playbook’s really working particularly
in this marketplace
and the key is well how do i find more
trades like this
and you know how can i push that next
level so you know maybe you guys
haven’t had a trying to think of the
right number
but maybe you haven’t had just in one
trade
a twenty thousand dollar trade to date
and i’m i’m thinking as to whether or
not you have and maybe have and if
i actually think you guys had a a pretty
big trade on that ipo
uh this this week so whatever that
number is
you know a good thing for you guys to be
saying is you know next time i see a
trade like this
can i hit that next level that next p l
number can i challenge myself to hit
that next p
l number for an a plus trade like this
and then keep moving that number
up so you know one i appreciate you guys
talking about this now two i almost want
to kind of apologize and i hope we’re
not throwing you guys off
although you probably are just holding
in as you should be and maybe this is
actually helping that you’re not taking
up more
uh than maybe you didn’t want to um and
the trade’s still going on
but uh but the last thing is
just keep getting better with these
setups and obviously this is a setup
this works
today is a perfect example yeah and i i
do want to add on that i think that the
the playbook here is no coincidence that
we were working on this
um tuesday night wednesday night you
know revising the playbook it’s no
coincidence that thursday we come in and
and we look at i mean nearly the same
exact technical setup
um from a perspective of the five minute
and and and take the same exact trade
and make
two x we made on this one um and and we
are still holding that’s awesome
that is awesome that is absolutely
terrific
that is what that’s why we do these
exercises
yeah so with regard to what we did well
what we did i think
we did a good job with separating our
core from our momentum uh this time
around that’s some
that’s a new thing for us that we’ve
been trying to do that way we can be
nimble on our personal accounts with our
momentum shares
without ruining that core position at
that initial breakout price
um with what we did poorly we really did
not risk enough
with this setup we only risked 15 of our
joint daily stop and only 10
of our personal daily stops on this
trade this is
way too little for this market uh what
we were trying to do in this market
with it being a lot more slow is 30 to
50 percent of our daily stops on a plus
setups
uh and this is because these a plus
setups really are few and far between
and so by risking a lot more on fewer
setups it forces us to be extremely
selective
and allows us to really get paid when
we’re right uh so that that really
encourages us to not over trade
and um you know make a lot more make a
lot more
on these trades all right guys
appreciate it maybe we’re gonna have to
have you come back
and talk about the breakout trade today
that you guys made in tesla
but great to hear that you did even
better than this one
and uh another good trade here
appreciate it
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