In this video, learn how to use Tape Reading to enter a profitable swing trade. Two prop traders and Mike Bellafiore present an outstanding entry using the Level 2 (Tape Reading) for a profitable swing trade. 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 use tape
breeding to enter a profitable swing
trade
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 trading
classic one good trade and the playbook
in this video two prop traders and i
present an outstanding entry
using the level two tape reading for a
profitable
swing trade let’s get to work on sharing
these important trading lessons
so you can grow your trading account
[Music]
so this is going to be a consolidation
breakout trade in big c from earlier
this week
this has been constantly breaking out to
new all-time highs on really large
volume
and it’s just really been in play the
this past week as a
major mover so you’ll see up here we’ll
have the level two for big c
and the um five minute chart
um and this is what the one minute looks
like before the trade
we should give a little bit of context
this is
a bit of a mix between a breaking news
play and a low flow trade
big c midday on tuesday announced that
they were partnering with facebook
and basically we’re going to offer them
infrastructure such that
anyone that was shopping on instagram
could directly
go through checkout on the app um
so as well bixey is a recent ipo
ipo at the beginning of august just
under 30 million
shares so it’s definitely going to be
able to put in some squeezes especially
with news this significant and one more
thing to recognize is all-time highs
were put in
on its second day at 104 so we’re going
to be watching that
as potential catalyst for for more
squeezing this trade is a midday trade
a consolidation buy and then break out
so you can see it’s about 11 45 big c
had
worked its way from 80 to 100 and then
we had this
consolidation area you’ll see on the
tape we’ll pointed out this 95
is a really big support level and
there’s little support below it at like
94.
so we’re really looking for a hold in
this area of 95
some clear buying and hopefully a break
out to the upside for new all-time highs
so i’ll start out the tape here and
we’re really just going to point out for
the start it’s going to be a little slow
but this 95 area is going to really
support
and really spend some time there
this is a five minute chart now
so you can just see we’re really slowing
in this area
so matt and i were going over this uh in
real time because everyone was watching
this with the breaking news
and in my eyes i was watching this 95
level we both were
and if you’re looking for a short
squeeze trade here there are really
two ways you could look to approach it
at least from my playbook
one being 95 holds for another five or
so minutes and just buy into it and risk
a wick below there or what we see in
this case is that 95 breaks
and quickly re-bids and that’s even a
stronger buy signal
in my opinion so first of all um you
can’t see it as much on the five-minute
chart but our initial
move up in big c had 95 as resistance
and then it then broke through made
another leg higher and
same idea of resistance become support
95 began holding again and now we’re
forming about a
30ish minute wedge against 95 as a
bottom
yeah we’re expecting if there’s going to
be a lower high in this for continuation
that this lower high would hold this 95
area as that’s where we initially broke
out from
and we saw a lot of volume trying to
hold it down there so if they can hold
it over this level then those shorts are
potentially still underwater
and we can see a squeeze higher to new
all-time highs
so as graham said we were looking at
this and we were saying all right we
know 95 is a big level
i think the most attractive way for us
to get long is to see
a move under 95 and a quick rebid as
graham said over 95.
and that’s actually what we’ll see come
in here in a second
so we’re race below 95.
holds in this 94 area
v wap’s not is still back down to like
90 dollars
so this is still holding high we haven’t
really seen that follow through to the
downside
and it’s important to recognize that at
this point in the trade
there’s big positions short and long
deciding which way this thing is going
to go
and 95 is the obvious level for a bunch
of longs to stop out
and the fact that we don’t actually
follow through the downside after it
cracks and here we rebid it
it shows a real sign of strength that
buyers are willing to buy this
even down in 93.
so if this can hold up here my ideal
entry our ideal entry would be if this
can consolidate
up above 95 again for two or three
minutes and really hammer in long
so i believe this was about near our
long signal entry
because we had just bid under 95 again
but it was a lot shallower this time it
only gets like 94
60s and then it quickly pulls back up to
95
again really showing us people are
buying this under 95
for for certain because we’ve seen this
happen three times now
and remember this is breaking news with
facebook obviously
a massively strong company especially in
this market environment
um and it’s only an hour into the news
breaking so this thing should certainly
have some
some legs forward so i want to pose a
question to you guys so when it pulled
into 95
did you bid in front of 95
before you saw anything on the tape
before you saw the strength on the tape
i did not either i waited till we saw
the hold over 95
after the test below just because i knew
if it starts holding below 95 and then
quickly gives out
this thing could give out another two or
three points right back to v-wop
really giving some tough bursts to
reward until
what i felt like was confirmation that
we can hold over 95
because we tested below previously and
really couldn’t break down
yeah and also we just squeezed up about
35 percent
in about 30 minutes so i’m imagining
this is going to need some time to
breathe
and also we haven’t seen 95 tests
several times so i want to confirm that
that’s a real level that’s being watched
yeah and like matt said this can slip
out really far under you if you just
blindly go in before it confirms
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
right now at the top right hand corner
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that’s going to open up this free
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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 one thing
for you guys to consider
is and that makes perfect sense
one thing for you guys to consider with
your strategies
as you get a little bit more advanced is
to allocate some risk just based on
price
a minority of the risk just based on
price but
some risk just based on prices so for
example
you might if you
really like the breaking news you you
have some
edge with breaking news
as a pattern and of itself meaning
the news should make the stock finish
high of day
you could allocate 20
of your risk per trade based on price
and then wait for the confirmation
to add another 80 that you’re going to
risk on this particular trade
i’m not saying you should do that i’m
saying that
there are traders that build their
system around
putting a percentage of risk based on
price
and then a percentage of risk based on
when they see it
when they feel like they have a good
grasp
that this is a special situation and
that this thing could really run to high
of day
i actually like at the beginning of your
trading career
as you’re developing as a trader for you
to
keep that percentage at zero or for you
to keep that percentage really low
and for you to be able to see the turn
so to see the pulling and the pull and
stop or to see
it turn back up or to see the strength
on the tape
i’d like for you for you to be able to
see it
that that that area that you can risk
off of so in this case
the signal from the from the level two
from tape reading
that you can trade off of
there are going to be traders and you’ll
see this with shark you saw this today
with shark
in hlf uh how he was allocating a
certain percentage of risk
after breaking news into a pop
after the stock had dipped a bunch
without actually seeing it turn
that is again that’s more advanced topic
but something to be thinking about
i i do really prefer
for you guys to see the turn i i think
that
is better for your development that
makes sense how people could use that
system to get a better price
just get their feet wet get a little
more information
what you give up by waiting to
always see it and to leave all of your
risk to after you see it is the times
when it pulls in
it stops and it just runs to highs it
pulls in it doesn’t really
have a tremendous amount of volume the
sellers stop
and then people chase chase chase higher
and
you you miss that pulling based on price
you can study how much you’re going to
miss overall with your
particular breaking news strategies and
whether or not you you should even worry
about that
i suspect you probably don’t i suspect
if you save full risk for after you see
it
you’re going to make plenty and be able
to trade that bigger and have a better
risk reward on a breaking news trade or
a polling trade or a high volatility
trade
but i want you you guys to be exposed to
how some of the experienced traders will
divide up their risk and then the other
thing is when you’re
in a position when you buy the pollen
based on price for a little bit
and you have that position you do tend
to watch it better
when you have risk on when you have a
little bit of a small position it does
help you to track that
particular opportunity better definitely
and i think that price based risk it
makes a lot more sense
for breaking news trades like this and i
feel like
at least for me personally i was
treating it more as a low float short
squeeze setup when in reality it’s it’s
kind of a combination of the two
but in my own personal trading right now
one of my main
variables that i look for to take the
trigger to actually enter into these
trades is what we see here
with this 95 rebid um so once i see that
i’m willing to put on big size but i do
hear you that’s that’s a good thing to
be looking forward to
so right here we’ll see the 95 rebid
signaling us long
and then we’ll see some nice
continuation
once this level really holds so we
hit on 95 really hold it we get long
i think it was like 95 10 was my entry
yeah and now matt and i are talking over
audio chat and we’re saying you know the
idea for this trade we’re still putting
on some risk given how much this could
fall out
the idea of this trade is really to see
high of day and for this thing to really
squeeze
up towards uh all-time highs at 104.
so that’ll pick up in a sec here means
they were in the 96s
now speed on the tapes kind of picking
up a bit
i just want to clarify for some of the
younger guys watching
when you see a level we have this 95 as
a level
and we see a stock leak below that level
can’t hold below that level and then we
bid to that level
that’s a signal from our tape reading
skills from our level 2
indicator that this could be a sign of
strength
that our our reading the tape skills
are giving us a signal in of themselves
that there is strength at this level
we’re not going to make lots of trades
just
with reading the tape we’re putting
variables together
but we want to get used to understanding
the signals that come from reading the
tape
that are more important and that’s a
more important signal
leak below a support level that we
suspect can’t really hold below that
level
re-bid to that level some volume done
around that level
not trading below that level
that’s a signal you know so we get that
and we saw that the other day with
dick’s sporting goods
on the short side 54 was the resistance
level it leaked above that level
it couldn’t hold above that level there
was some volume done around that level
it held below that level just couldn’t
trade above that
that triple intraday top and so you’re
seeing the mirror image
you’re seeing not quite the mirror image
but
a subset of what that looks like on the
on the long side all right i just wanted
to point that out
sorry guys so i’ll speed this up a
little bit um like we said our plan is
really this should make new all-time
highs
so in terms of selling some risk um
we only or i only sold one fourth into
like 101
just in case it rejected at that new
high but we’re really holding the core
of our position for a new all-time high
i think that’s part of why team trading
is really nice because it’s very hard to
sit on your hands while this thing is
working in your favor but we’re both
just kind of keeping ourselves
accountable
like we you know we owe it to ourselves
to hold on to this position towards hive
day
exactly that’s kind of what we were
saying we were like the amount of
information we gathered and the risk
we’re taking
we really should give ourselves the
opportunity to get paid and see this
really good breakout because the
variables we were looking for
are playing out in front of our eyes so
clearly we’re seeing
something um on the tape and in the
stock that could work in our favor so we
really want to let that work for us
when it’s a good entry price as we saw
so i’ll skip ahead here to kind of where
we start to
break out and what i love about this is
matt and graham is so often when people
think about reading the tape
level two trading they think of scalping
they think about the only reason
why we read the tape is to make scallop
trades
this is a perfect example of how you’re
using your reading the tape skills to
enter for something that’s going to
become a swing trade for you guys
you’re looking for a shorter term swing
trade
an intraday swing trade you’re looking
for hey
where do i buy this at support and try
and hold this for
a run and
you’re going to look at a level that you
identify on your chart
as a thesis for where this may pull into
but then you’re really going to zero in
on the tape near those levels
you’re really going to use your reading
the tape skills
to see where you can enter
effectively for a swing trade and when
you can do that
you know essentially you’re using your
reading the tape skills to get in at the
best prices
for your swing trade ideas that’s going
to make your swing trading
much more profitable that’s going to
make your swing trading have
a much better roi
that’s going to enable you to take on
much more risk
with your swing trading because
your risk reward is is so much better
and the idea of all of this
is for you guys to be able to trade with
a lot
of size and when you can enter at better
prices
and when you can enter at a much better
risk reward
that means you can size up significantly
more
agreed those are the trades to
definitely build a career off of that
you can scale them up because your risk
is so
defined and the tape reading is
definitely one of
in my trading the biggest positives in
helping me really define that risk
in the levels so going back to the tape
um
you’ll see here we just broke out um to
a new high
so we’re gonna be slowly scaling out
into strength but we’re really holding
our core
for a real reason to exit
yeah and again this is somewhat of a
short squeeze trade there’s going to be
a bunch of shorts that have piled in
over the last 15
30 minutes against that 101.50 or
whatever the high was
um so a lot of them are getting stopped
out right now and we want to be able to
see that short squeeze kind of die down
before we take our profits
so we can see the bids are stepping up
slowly but then we really pick up speed
here
into 103. so this is important
so we’re thinking all right this should
really break out here tapes picking up
this should be a strong breakout
nothing no really levels above to like
100 i think five
it is 104 is the all-time high 104 is
the all-time high so we’re really
expecting this to go through 104
at this new all-time high but we’re
going to see
soon we’re going to get over this 103
make a huge up move
and instantly reject so right there we
just went to 103
70 and instantly pulled back to 102.70
so that’s not anything crazy but to us
that’s
signaling all right this really should
have broke out to new all-time highs
might be some some sellers stepping in
here we really thought it would go
so we’re taking off some more risk here
then we’ll see here again we’re watching
all right if we get over this 103 again
we should really get to 104 make a new
high
a point’s not that crazy of a move for
this especially if it is squeezing
shorts
another point yeah so i still actually
have all that core left because
we really might need more than one try
to break through 104
but if we’re still struggling yeah it’s
time to readjust
yeah so like that time we got through
103 again
but then came back under the level um
and then you can see sorry i skipped
that a little too far
i’m gonna pull from 103 i think right
back into 101.
yep and this is where i got out yeah we
really were expecting it to hold this
103 up here
hold over that 101.50 and when we’re
pulling back into that
because it’s already made about an atr
move up from where we were in
it’s gone up almost um
what was that 15 points i think the atr
was like
10 or 11.
and so that was our real exit when it
just like stalls up here can’t really
hold this 10150 which was the initial
breakout
you see you get back under and then pull
back 200 and that’s actually
the high for the morning there so it
didn’t end up to be able to be a huge
swing
but still the risk to reward on a setup
like this is
great and we want to take this every
time whether we get
brand new all-time highs or just a nice
breakout like this you’re still going to
get paid
so i’ll skip ahead just for the morning
you can kind of see just becomes like a
chop zone
for the afternoon um we know a lot of
volume is done on both sides we’re in
the range so we’re not touching it in
range
and kind of just seeing how prices
develop into the afternoon
to maybe trade this the next day and
to use those levels we saw today into an
opening drive potentially the next day
because we don’t always want to trade
these consolidations into the close
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