You have a promising technical trade you want to make. But you are not sure when to enter. And/or you are not sure when to get big in the trade. In this video, we help you with that. See how we use Tape Reading to enter a promising technical trade with size. And we do all of this while controlling and limiting our risk. Let’s get to work on sharing these important trading lessons so you can grow your trading account.
View Video Transcriptso you have a promising technical trade
that you want to make
but you’re not sure when to enter and or
you’re not sure when to get big in the
trade
in this video we help you with that hi
i’m mike bellafiiore co-founder of smb
capital
and we’re proprietary trading firm
located in midtown manhattan
and i’m also the author of the trading
class take one good trade in the
playbook
in this video see how we use tape
reading to enter a promising technical
trade
with size and we do all of this while
controlling and limiting our risk
let’s get to work on sharing these
important trading lessons
so you can grow your trading account
[Music]
today we’ll be doing the reading the
tape for a trade in
pltr from 12 8 so just a couple days ago
um this trade will take place on this
top right chart
and top right um level two
sam put together this really great
technical
um drawing here on why we were really
looking at pltr this morning
sam do you want to talk a little on this
yeah so
the previous day you can see pltr
had a very strong move about 20 percent
move from uh
the opening to the high of the day
and then you can see in the after hours
in pre-market a few levels really
started to develop
and this is currently right before the
open of the trade
we wanted to take so a few levels i was
watching were 29 which was the previous
day’s high
and also a whole number as well as this
30
30 45 which was really ended up being
the main level for the day and you can
see this is a really key inflection
point with
multiple swing high failures and then
once we were able to regain it in the
pre-market we start to hold above that
level
and then pre-market high is also level
that we all like to look at and that
pretty much correlated right with 31
dollars also whole number
so ideally on the long side we would
want
price to blow past that pre-market high
as well as holding ultimately holding
above that 30 40
level and then on the short side we’d
want to see a failure at pre-market high
and then a retest and another failure at
that after hours high
as well as that inflection point at 30
45
so we can run the tape and see how these
different scenarios play out
and then it’s really important just to
watch how price
uh reacts at this 30 40 to
30 like 46 range it’s really interesting
on the tape
yeah and to give a little bit more color
on pltr for anyone
that doesn’t know the little bit of
history behind this but um it recently
ipo’d um
palantir technologies and they build and
develop software platforms
for the intelligence community in the
united states so
it’s been a pretty hot uh tech like ipo
since it came out and as you can see
there’s been a lot of
both buyers and sellers with lots of
shorts getting trapped as we make these
new
all-time highs making another attractive
candidate for having elevated arvol
and maybe outsized moves to really
capture great risk to reward
opportunities
sam fair to say that when thinking of
technical analysis
that 30 45ish area
is a key technical resistance area
that we can look at when we’re making
trades
yeah exactly the this is the the key
level for the day
and you can just pretty much craft that
bias
just from looking at the chart you can
see all those little circles i have
you can see that this has definitely the
battle level of the day
so when price opens and you go into
real-time trading
you definitely want to put much more
emphasis on
price levels such as this 30-45 level
where you can see a it’s like just a big
inflection point
okay good just to speak to some of the
newer people
so that means that we’re going to be
more interested
in tape reading and reading the tape
and what the tape looks like potentially
around that 30 45-ish area we’re not
just making trades
normally there are some instances where
we do
there’s some momentum trades that we do
there’s some ipo trades
that we do when volatility is really
high there are some times when we do
just trade
off of the tape but
almost always we’re putting together
trades
we’re looking at technicals we’re
looking at fundamentals that are
important to us
does it have a news catalyst and we’re
using our tape reading skills
together and we’re finding setups
that match our playbook trades okay so
we’re
not just finally looking at the tape
we’re not just blindly looking at
technical levels we’re not just blindly
making trades off of the fundamentals i
mean we all know
that i am a little perplexed at the
price right now of doordash
but you have to it’s not enough and the
market doesn’t care that i’m perplexed
that it’s trading up at these levels
and first of all maybe i’m wrong second
of all this is uh
people get the vote and i’m one vote in
the marketplace
and and so we don’t just get nakedly
sure just because we think doordash
has got a lot to come in from uh the
second day of its ipo trading
all right so let’s see if uh let’s see
what happens
great we know what happens actually
we’re reviewing we’re giving an example
of
uh what we did on this day and an
example
of this is a perfect example
of how we’re going to use our reading
the tape skills or tape reading
with an important technical level
exactly
so reminder it’ll be on the top right
here and we’re watching this
push into 30 50 or 30 45
that sam had um annotated on the other
technical level
so we just know that’s a really big
inflection level so we’re
we’re watching kind of this dip and rip
breakout
and seeing if pltr um
if it finds resistance at this 30 45 30
50 area after breaking down through it
because if it can stay below that level
that could be a potentially
good sign of continued weakness as it
tried to
make a new all-time high did failed
and then got below that level so now
we’re really seeing will it hold below
that level
hey matt do you want to pause it real
quick so we can just give a little more
context so you can see how the right
after the open how it’s already traded
pretty steep opening drive through that
pre-market high in 31 but
instant failure so that’s definitely the
first signal for
for us to start building a short thesis
and then you can see
super strong reaction down from uh 31 24
all the way below 29.50 and then
this move right now is more so i would
say short covering than actual true
buying
so right now we’re ideally just looking
for places
to start building a short position if
we’re not already involved
so that’s just kind of the overall
context for why we’re looking at the
short
at this time if you want to learn three
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than from years of online education yeah
how slow the tape is on this
up move is a nice indicator of potential
weakness or continued downside because
like sam said it’s not as much
as true buying but more um shorts
covering and people just
resizing their positions
so we’re coming up into this important
30 40 area 30 45.
you can see there’s some offers stacked
at 30 50
which never get hit
and you can see how this is a pretty
obvious change in the tape this is the
first
point from this whole up move where
we’re starting to find a little bit of
resistance on the tape
before we’re just easily cruising
through these different numbers
and now you can really see how how this
level is developing on the tape
exactly for like the past two minutes
the bids had been constantly stepping up
every five
ten cents and finding a higher ground
but now we’ve
seen these 3050s never be able to get
hit and these 30 40s are really stalling
and we can’t hold above there
and despite pretty strong on the uh
on the bids there pretty strong size
we’re just
taking it out super easily can we go
back to
the last up move three things one
as something’s coming into just stop for
a second one as we’re coming into that
key technical resistance area we want to
see how the stock goes up
so i want to see how the stock what’s
the buying pattern
into that resistance area you know are
they
repeatedly rebidding at 30 30 are they
repeatedly bidding at 30 35
are they repeatedly bidding at 30 40 are
they repeatedly bidding at 30 45
and then do i notice that pattern shift
so that’s that’s number one if i notice
that pattern shift
i i can use that as a way to enter
secondly let’s go up and watch the
offers
at 30 50. let’s see if we notice
anything about the oversight 3050.
what do we think about those offers at
30 50.
to me that shows this is clearly a
potential
resistance level both on the tape and
also as we see
on the technicals and there’s clearly a
player there
stacking size on that offer to try and
hold the stock below that level
okay so on the way up
we’re watching the buying pattern two
sam rightly points out
that he’s noticing some resistance on
the offer it’s harder for the stock to
go up
they’re buying but it’s harder for them
to get up
you know when they were buying at 45
cents at other prices the thing would be
75 cents by now
not really getting up very much all
right so we’re noticing that on the tape
we know that this 30 45
is a technical resistance area from
previous trading we see that there’s
some stacked offers
at 30 50. we we should start to think
about using that 3050 as
protection we should start to think
about
initially building a position against
this 3050
and then lastly we should
look to see the buying pattern change
and if we can see the buying power and
change
then we can get really aggressive
against this 30-50 level
we we can use this as the see it moment
to really get into an aggressive short
we can use this as an example
to be very aggressive with the thesis
that we’ve developed so we think the
stock’s going to be weak because of the
price action we noticed right on the
open
that sam very very astutely
points out spot on you know big down
move
after a failure to hold above the
technical resistance area
that is a that’s a technical failure and
so
we’re looking for that moment to lay
into this thing to be aggressive
to make to put on big size and this is
an example right here where we may be
able to
put on big size by using our tape
reading skills for entry
we’re not making this trade just based
on tape reading we’re making
we’re making a sizing decision we’re
making an aggressiveness decision we’re
making an entry decision
based on our tape reading skills and
we’re we’re formulating this trade with
with with a technical factor as well
okay
but we’re looking for those moments we
want to be big we want to be aggressive
and this could be one of those moments
something else i want to touch on that
you kind of pointed out with this 30 50
level
as kind of pretty much where you’re
risking the trade off of
so you could approach this two different
ways i would say
you could just risk your whole position
against 30 50
or you could size more aggressively and
risk let’s say
60 70 your position against 60 50
lifting and then ultimately risking that
rest
against high of day or that 31 level
so you could be able to still have
some a little bit of size on if this
3050 lifts and then ends up
re-stepping back down and then you could
also
end up getting a lot more shares if kind
of like what’s happening now if this
30-50 is the true level of the day
great so i’ll play it through one more
time so you can see
these 30 50s never really decrement
they get refreshed a little and we pull
back away from the level
yeah i want to see it can 3045 hold the
bid
here’s 45 can’t really hold and we know
that can’t really hold the bid right
yep and then it pulls back 10 cents
which isn’t really something we’ve seen
too
recently on this i’ll hold up move can
it hold a bit
that’s what i’m looking at can’t hold a
bed
really good sign when you see a bunch of
size popping on the bed
it just gets taken out almost instantly
as well
it can’t hold the bid and you’re looking
for that change in pattern
and the down moves different than it had
been you noticed
the first time it couldn’t hold 45 cents
and move down a little bit second time i
couldn’t hold 45 cents
um move down a little bit less uh second
third time it couldn’t hold the bid
at 45 cents it goes down differently
and this is where you can you can start
to make a trade decision
as to whether or not you want to go for
it
those are the moments and that’s why you
go back and you watch the tape you look
for those nuances
where the buying pattern changes it just
can’t hold that 45
cent bid and you ask yourself how do i
get really aggressive
where do i get really aggressive against
but perfect example right here
being able to be big using your tape
reading skills going for it
being in the trade you want to be in
being in a stock you want to be in being
in the direction you want to be in
and being able to risk very little
and put yourself in a really good
position to make a big trade
exactly and we have a quick picture
to just show how this trade played out
this
you can see this indication here is the
clean rejection level we had at the
previous all-time highs at 30 45. this
was the area we watched on the tape that
clearly held
and then from the top of that move to
the bottom of the day was about a 12
move so you could have been sized up
really aggressively in a trade like that
to make
a full atr on a stock in you know
in an hour if you wanted to add to your
position you can see this
2980 level also became a
pretty clear resistance on the tape as
well as almost identical
price action on the retest of that level
so you can almost take
oh an identical trade as the one you
took for your first entry
for a re-ad for like continuation to
load day
exactly and it’d be easier to notice
this in real time because we had this
information of how it traded earlier so
just sticking with the stock and using
that information you’ve gained as an
edge is definitely important to make
some some better trades
all right great super good example of
how to use your tape reading skills for
entry
and how to use your tape reading skills
to be big
in a really good trade and be able to do
it
with minimal risk
so great job great job teeing this up we
were making this trade
i know i made i made this trade in real
time
um appreciate you guys teeing this up i
thought it was a really good
uh teaching point and then you know
this is the idea you go back and you
watch the key moments the key inflection
points on the tape and you
notice those little nuances and you get
better at your tape reading skills so
that
when a similar setup like this comes
again
you will trade it with a little bit more
size trade it with a little bit more
conviction
trade it with a little bit more
aggressiveness know what you’re doing a
little bit more
and improve as a trader and if you just
keep doing that you keep getting a
little bit better a little bit better
that compounds on top of each other
obviously you guys know there are very
very large traders
in the desk that put on huge size and
trades like this
dwang chatted me about
a trade in that glsi is that is that the
stock yesterday that was going
crazy yep that gls i
uh he scalped that on the turn with huge
size
he ended up walking into a much bigger
trade than he thought
i don’t think he intended to make as
much money as he did but
you know he is an example of same
principle
shorten the turn using the tape reading
skills to get in with a good entry
where these trades can become
very very significant p l uh movers
appreciate it guys uh any questions uh
so
we have maybe two questions it looks
like
first one what would happen if you take
big size here and they take out the 30
50s
quickly would you get out and then
potentially re-enter again
it depends on the trade you’re making i
would if you’re
shorting the turn if you’re waiting for
the buying pattern to change
and you’re using that resistance area
if you’re making that kind of trade yep
you cover above 50 cents if you’re
making more of a swing trade as sam
mentioned and you’re sort of scaling
into
maybe the whole number you are
uh gonna put on some size you’ll
probably take a little bit off
at 50 cents but not all of it and then
watch what it does
uh into the whole number because it’s a
swing trade so it depends on the trade
you’re making
good question great and then just one
more
um what’s generally a good stock float
range to trade with
if there’s something in mind you you
think
good question so and these days uh
that changes um and and
a lot you know we trade some of these
stocks where the float is low but the
volume on the day is is very high
i i’d ask you to think about it more as
to whether or not you can control your
risk
and so you watch the way the stocks
trading can you control your risk
d can you get out where you think you
can get out
and that is is really the better
question to to be asking these days with
is some of these low floats that are
really in play that
maybe you would decide not to touch
based on this float
on the open but because there’s just so
much value on it it makes it very
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