In this video, watch 3 prop traders present how they united to produce their most profitable Breakout Trade (Tesla). 3 prop traders present their Tesla Breakout Trade, in step-by-step detail, and how they worked together in real-time to make more trading profits. Let’s get to work on sharing these important trading lessons so you can grow your trading account.
View Video Transcriptin this video watch three prop traders
present how the united
to produce their most profitable
breakout trade
to date and tesla hi i’m mike bella fury
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 and the playbook
in this video three prop traders from
our firm
present their tesla breakout trade in
step by step detail
and how they work together in real time
to make more trading profits
let’s get to work on sharing these
important trading lessons
so you can grow your trading account
[Music]
tesla on this day had a stock split news
and of course we had seen how app would
reacted
uh to the stock split news this put us
in the mindset of
um there’s likely going to be a positive
reaction from retail traders
because of this because of this news but
i think just to jump in right here
you guys presented a breakout trade
previously in tesla
we talked about getting better the next
time you actually see
another breakout trade in a high beta
name it happened to actually be
in tesla again but the work you did to
do your playbook
the work you did to consider how to
trade bigger
we talked about in that in that last
video
and then this is
did you guys improve this is did you
guys trade a little bit bigger this is
did you trade it with a little bit more
confidence this is well how’d you do the
next time
so in that context how’d you guys do
uh we did really well i think i think
that goes for all three traders here
that
that took the trade i think we all sized
up and pushed each other
um in in sizing up this trade because we
had seen this trade pan out in front of
our eyes
just two days prior so seeing that the
tape was similar
to what you’re going to be seeing today
seeing that the
the confirmation of the chart pattern
the market setup
and the the theme the overall
environment something steamboat uh dr
steve bob talks about a lot
is you know the theme of the ev sector
being hot that was still valid
everything from the playbook from two
days prior was
very much in play on this day and um no
doubt we each
probably got even a little bit too big
for our stop um and
um and obviously it paid off well
because
again we had that tape confirmation we
had that chart confirmation and we knew
it was time to put on
the risk for this trade as it was
panning out in front of us
all right let’s see it so just going
back to the big picture fundamentals
um tesla had run up 40 in the last five
days
after announcing that five to one stock
split and
it was now basing above the previous
all-time high for the last two days
so we had investors chase the stock
price up broke all-time highs
now basing on this particular morning in
the pre-market
uh tesla only was doing about one and a
half percent of its average daily volume
and it opened only with five arbol and
by 10 am the rv was only one
so these this was pretty weak
uh volume numbers on the open which
meant that
unlike last time this time on the
breakout we really needed to see
some outstanding volume uh otherwise it
was a no trade
so big picture fundamentals spy
uh very very big uptrend for the last
five months
uh holding above the 200-day moving
average
and uh yearly b-wap uh it actually had
taken a new all-time high the prior day
so we’re in a bull market and
in general breakouts have been working
same story for nasdaq
uh very strong uptrend since march
and the daily rsi is not yet overbought
and so we’re still looking at breakouts
nasdaq has a lot of relative strength to
spy so
we’re favoring tech stock breakouts uh
over anything else that just has a lot
of um
helped us out add a lot of conviction to
this setup yeah and armand friendly
reminder
when you say rsi is not overbought
can you define that yeah so we defined
rsi overbought as being above 70.
today the rsi the daily rsi was 63
and so typically what you see in bull
markets is this rsi will oscillate
between
about 50 and 70 and that just means that
the market is
grinding higher without uh necessarily
being extremely overbought whereas if it
had gone above 70 or even 80
that would be indicative of a very fast
up move that
that would trigger overbought and in
that situation we would
more likely be looking for a top in the
market because it would be
um because of how overbought it would be
so tesla had run up
40 percent uh since announcing the stock
split
news it has had been consolidating for
two days above the prior all-time high
and so
we thought that this consolidation could
you know either break up or down
and if it were to break to the upside we
definitely wanted to be involved in the
breakout because
um you know with with it being at
all-time highs
we could have gotten a lot of
follow-through from that breakout
what’s the significance to you guys of
this being above its all-time high
spending two days above all-time high is
is generally indicative of potential
continuation you know for something to
go to all-time highs sometimes you won’t
get people chasing above all-time high
immediately
and especially when you get an inside
bar on the daily what that shows you is
we had a big move two days prior and
that
that needs time to digest and for a
stock to digest a move
and generally stocks would like to
digest moves that are above one atr
so once you make a move about one atr we
expect the stock digest to move and so
a two day digestion of that
of that run-up on on tesla was
incredibly bullish because that tells us
that there’s no sellers up here
they’re proving to be holding it up here
they’re still they’re still supporting
the the breakout area um and
uh that tells us it’s not getting
rejected so as soon as we start making
new eyes
it’s it’s it’s so logical to be to be
uh to belong and nano by atr you mean
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years of online education the average
true range of the stock and
you know for tesla that’s um that’s
obviously
right around 100 points and obviously
atr
uh changes based off the stocks past
at s b i think we use the past 20 days
to determine atr the average true range
of the stock
um that it moves on an intraday basis
and it’s good to use atr
as a as a generic way of targeting
um direction i’m sorry not direction
start but
targeting um potential extremes um
of the stocks range on entry databases
so how much the stock
moves intraday on average
yes yes atr got it so
over the last month you can see there’s
a here’s actually a 30-day chart
rather over the last week you can see
that tesla has been consolidating
pretty tightly and holding added ties
after
making a big run up a few days prior
and so we were really on this day
and the day before as well looking for
this consolidation to break either way
we were getting involved a little bit on
the short side um
when i would try to break the priorities
range and then
um when it would get back to the to the
top of the range we would
try long so we were really looking for
range expansion either direction
and you can you can just see that the
tighter it got it seemed more and more
likely that we were going to get a high
volume break
one way or another and arm on the purple
line denotes what
that’s a 21 moving average uh on the 30
minute
and so uh you can see that it
was holding down on date on the first
day of the consolidation but
uh it broke that and um that’s just
indicative to us that we’ve begun to
to consolidate and you use that as
momentum indicator
uh yeah on the on the medium time frame
on the 30 minute
okay great here you can see what
happened on the open
um so on the open we spiked up
pretty low volume like i mentioned
before and we began to consolidate below
the
uh lower the upper boundary of that
consolidation
and so this is when uh we got interested
in looking for the breakout this is
where we
told ourselves we really want to see a
high volume break
of this consolidation to get long from a
technical standpoint
why is elevated volume important for you
when you’re thinking about making a
trade in tesla
elevated volume is important because in
order for this consolidation to
uh break out for real we need to see
elevated volume otherwise
if let’s say that we saw that breaking
bar with
no volume we could just be you know
still inside the consolidation
and the breakout is probably more likely
a fake out
and if anything a short signal but
volume indicates that there’s real
buyers behind this move and it
dramatically increases
likelihood that the move is going to
actually follow through
so that gives us the confidence to put a
stop below the breaking bar
and hold on to the position for for a
pretty substantial move
and without that elevated arm of all
fair to say you’re not taking this
technical trade
yeah exactly and if there’s no oval in
the stock and no are well
in the breakout it’s definitely a no
trade oh so you said something different
so when you guys talk about arvol for
the
newer guys out there what do you mean by
that the relative volume
this morning tesla’s relative volume was
very low like it it opened at five and
it came down all the way to one i think
during that consolidation you see there
the arvol even dipped below one
so that was if anything kind of
concerning for the for the breakout but
then the tape really changed when the
breakout occurred and
our ball started picking up very quickly
i think it quickly got back above one
and then got to 1.2 or 1.3 and you can
see on the
uh on the tape and then also on the low
time frame chart like on the one-minute
chart
the volume bar started to get very uh
very big you can see on that
15-minute chart um the 15 minute volume
becomes as big as the open and so
uh that was just very significant yeah
so relative volume we’re comparing the
volume that it actually is done at this
time of the day
via the past and so when arvel’s high
it’s indicating that there are more
participants interested and there’s more
big buyers interested or sellers
and that’s an indicator arvol a high
arvol tells us the stock
confirms the stock is in play with a
higher arbol and a breakout confirms the
stock is more likely to break out and
continue
so here’s the tape on the breakout max
if you want to jump in
and discuss what we’re seeing there
so um essentially what we saw was that
once it broke through the the prior
afternoon’s resistance levels so for us
that was a near 1910
so like 1913 we saw that the stock just
absolutely pushed through there was no
resistance the uh
tapes sped up the volume sped up as a
clear breakout
and just kind of understanding what the
bigger
picture thought was was that this just
spent a few days
consolidating and shorts are probably
going to be
versus that level if we just broke
through that level and then are
basically going right towards
all-time highs especially with the
volume explosion
that’s serving as confirmation that we
are probably right
in the um bigger picture trade right
so then as far as kind of the trade
management goes because like now this
turned into a
momentum trade realistically at least
for the first part of the move
this shouldn’t be breaking the prior
one-minute lows because it’s basically
now
a new trend that should bring in a
steady flow of buyers
so for managing some of the risk once
the first one minute low is violated
uh we can lock in some profits so that
way uh you know
the risk is managed and then from that
point
we can just kind of trail that versus
the more meaningful stops
but really just seeing how the
tape looked so different through that
1910 level
on this day whereas on prior days that
you can really see
how much the stock struggled between uh
1910
and 1915 showing in those days that the
that the seller was there and that in
this day the seller was not there
yeah and also it may indicate max
that the buyers are extra aggressive
yeah exactly so you know just just kind
of you know of thinking through the
psychology of who the buyers are and
most likely
you know like these are probably going
to be at first shorts
that are probably seeing that that it’s
breaking out
and that they have to cover and there
was definitely a certain sense
of of urgency as the stock was breaking
out and going
towards these levels yeah so when you
see a stock blow through levels
skip prices move move more than you
thought
then that can indicate it’s more likely
to follow through
exactly
all right great so as far as the exit
goes um
we uh we’re looking to hold on to this
uh for a bigger picture target of 2000
um since it was all-time highs we felt a
lot more comfortable than last time
holding on to a larger core and our mom
where did you come up with your target
for
from we used just the psychological
level of 2000 normally we would use the
next daily level but
since it was all-time highs 2000 kind of
lined up with about an atr move
from the breakout level you know
typically with tesla on all-time highs
it likes to
respect those psychological levels for
example i think 1500
was used as a big level same with a
thousand uh in the run-up
uh before march so
2000 kind of fit with the psychological
the psychology plus
it being very close to an atr move so we
tried to hold on to as much size as
possible
for that initial push uh once we saw it
um
stall at 1950. so i want to talk about
this so you guys were trading this
together meaning you were talking to
each other during the trade
yeah we were all on the phone together
uh during the
consolidation um before 11 a.m and then
we all entered the trade together on the
breakout was it helpful and easier to
hold
because you guys were communicating with
each other yeah absolutely um
we were we were on the phone and i think
we were all trying to push each other to
hold on to the trade
a little bit longer because we knew that
there was a very good chance that this
would close a high of day but
at the same time you know what we were i
think
i i speak for myself and nano at least
we were the biggest
that we’d ever been in tesla so um you
know it’s uncomfortable to
hold for for a long time i think i think
max was as well so
um it definitely was helpful having
uh the three of us push each other to
hold on for as long as possible
i’ll also just say that uh you know just
just like one thing that you know
especially working with uh nano and
armand is that like they know that one
of my goals
is to try and um hold trades uh for
longer and just try
and think you know on a bigger time
frame so by speaking with them
it you know ends up like helping me to
not close out the trade
too soon because i’m just like
unnaturally more geared towards
taking a profits quickly and just
locking in cash flow
so being able to speak with them through
the trade
allowed me to kind of see just kind of
like what was like going on in the
bigger
time frame and just kind of keep one of
my monthly goals
in mind something i’ll also toss in is
that um
having max on the phone for us is very
useful
because basically he helps us uh with
with pushing our size and momentum so
i i think what’s what’s useful about
from max’s perspective
you know from us is is to help him hold
size
um but you know for us
what helps us having max in there is is
him pushing us and identifying where
those bids really started stepping up on
tesla
and became significant um to where we
knew that if we had put on risk in that
moment that there was a good chance we
weren’t going to see a lot of mae
um and and it would have been valid to
risk off those uh
those tape signals and you know with
hearing max’s conviction with the tape
and seeing that ourselves too
you know there’s uh we work off each
other each other’s strengths which is
something really unique at smbs we have
people who are really talented in their
in their own ways and max’s talent
and tape is very evident and mean almost
hard work and bigger picture trades
that combination can definitely be
lethal to the market we will definitely
take a lot of p l out of this market
working together and nano
mae stands for max against equity
basically
um what we’re seeing what we’re
calculating there is how much
uh against our equity we’re gonna how
much the stock is is gonna go against us
um uh at any given position so
obviously we like to calculate risk
based off how much we
will allow the stock to draw down go
against our equity
um prior to being in the money and being
comfortable
and again those tape signals allows you
to have a very tiny mae
which you know in turn allows you to get
much bigger
you know even though i have a certain
daily stop
i can outsize my position you know with
with tape signals to allow myself to
to not to not draw down that’s
interesting it’s interesting that
max is pushing you guys to trade bigger
but yet you guys are pushing max to hold
longer
really good example of the different
strengths of
all of you being used
as a team to all do better
so just finishing up with exit as as
tesla got closer to
2000 it seemed that it was getting more
and more resistance
um so every time that it seemed like
it was turning a little bit early we
took a little bit more off
um and then by the time it actually hit
2000
um we weren’t actually in very much uh
size anymore we got out most of like
1980 1990
um and then it actually uh pierced 2000
and then sold off
kind of violently for 30 or 40 points we
wanted to wait for a lower high to
get out of the remaining size so we
waited for what we thought looked like a
lower high to
uh to get on full but you know of course
that being tesla just broke right higher
like 30 minutes later um and so uh
that was it for the breakout position we
actually all entered a new
position on the close for some after
hours follow through
and that was a that was just a different
setup there’s a couple of
potential catalysts over the next couple
of days coming up in this stock
that i guess you guys will be talking
about
the house it’s not going to react before
the stock split and then how is it going
to react after the stock split
yep absolutely i think um the last week
we’ve been trying to
come up with a game plan of of the trade
that we want to put on
um on the stock split or after the stock
split so
we’ll see a lot of people think that
there’s going to be zelda news
effect others think that you know it’s
gonna keep on rallying so
we’ll see what happens then all right
great and this is something obviously
you guys
can use for different names different
stocks
and try and be a little bit bigger next
time yep absolutely
um the the tech breakouts have been um
working well
over the last month or two um and so
as they continue to work we’ll look to
keep trading them bigger and bigger
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