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In this video, see a bionic junior trader on our desk in step-by-step detail review a multiple-time frame technical trade aided by technology.
Let’s get to work on sharing these important trading lessons so you can grow your trading account.
View Video Transcriptthis is the best time to be a trader and
it’s mostly due
to the current day technology the future
is
right now you have the ability to play
more offense
bionic trading tools can arm you with
more opportunities and the ability to
manage
more positions 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 and the playbook
in this video
see a bionic junior trader on our desk
in step-by-step detail review a multiple
time frame technical trade
aided by technology let’s get to work on
sharing these important trading lessons
so you can grow your trading account
[Music]
so this is a daily flag setup it’s
breaking out on the daily
in the airline sector and it’s also
setting up on this given day
across multiple time frames on aal
on 12 3 2020. so i came into the day
with
a few scenarios that could possibly take
place and i was speaking with one of my
mentors
at the firm in the morning and the first
one was
you know buying the flag from pre-market
levels
um and that was going to be a 1 5 15
minute full flag with 40
of my daily stop it did kind of take
place right at the open
i just didn’t really like it it’s it
took place a little bit too quickly i
didn’t like the tape and
you know i just wasn’t really
comfortable with it i didn’t think there
was a reward that was that great
um so i actually skipped that how much
time is that how much time has gone by
in the day
kyle um it was right at the open seconds
yeah i mean that’s a reason to pass
right not enough time yeah certainly i’m
not
and i’m really still getting more
comfortable with right at the open kind
of these opening pushes
i don’t think i’m there yet perfect
perfectly acceptable to say i don’t see
the flag yet because not enough time has
gone by
yeah the second scenario was
buying a washout into this 15 level if
it started
to hold build some higher lows and have
a flag break for a daily flag setup
i’d take that with 20 of my daily stop
that’s what i take my daily flag setups
with
that did not happen as well so both of
my scenarios really didn’t take place
what ended up happening is we got this
opening push again i wasn’t a
participant it was right at the open
um and then we kind of pulled back in we
started to tighten up
this is a five minute time frame tighten
up
build some higher lows and then we broke
out of this flag
and this is what we’re going to go over
this is what i ended up taking
um so often i’ll back test you know
my number one or number two ideas coming
into the day in pre-market hours
it doesn’t take a whole lot of time it
maybe takes 10 minutes at most
and you know coming into the week
airlines were certainly setting up for
what i like to see on the daily they
were
consolidating they were building some
higher lows and they were starting to
break out
so i back tested i ended up back testing
aao i thought
that was going to be the one that
possibly set up for me i back tested ual
but
um you know i was open to any airlines
setting up i just happened to run the
back test on ual it was a little bit
more liquid
um in pre-market but the back test was
for greater than or equal to 200 000
shares in pre-market volume
gapping up greater than or equal to two
percent they were both doing that they
both had very similar stats
um and seventy four percent of time it
breaks pre-market highs
when you know these parameters are met
and it runs about a buck fifty higher
from pre-market highs
so that can kind of give me a good idea
on the possible bias especially if we
break pre-market highs
and maybe how far you know some of these
names can run
it could give me a good target as well
is there a way to determine by what time
it would break the pre-market high uh
yeah
i i can do that as well and i do do that
from time to time and i
i should do that more i might actually
have it um
here yeah i have volume of high of day
here
but i can also include when it actually
breaks pre-market high
yeah i think that helped you that would
help you control your risk
or manage your risk better if you knew
that
okay good good idea by me
100 patting myself on the back i like
that idea good job bella
all right thanks um so the overall
market you know spy was at 368.
vixx was reading 21 and what i felt like
the market was most concerned about
at this given time was pfizer was
running into some problems with this
vaccine
and its supply you know getting that
getting the vaccine out
um it was pushed back a little bit
but with that said you know airlines you
can see the airline etf right here down
below it was breaking out and what we do
is
you know we follow price action and even
though there was some you know
somewhat bad news in the market it
didn’t seem like the market was really
reacting to it
um you know airlines were setting up and
they were breaking out
on elevated volume
have you found that watching some of the
other
airline stocks is more instructive to
you than looking at the etf
in the airlines i don’t know how common
it is for people to trade jets as an etf
whereas i wouldn’t say that
if you were trading a semiconductor and
you’re looking at smh
yeah i i mean it’s pr it’s a pretty
illiquid etf so
i was definitely keeping a closer eye on
like ual and delta i
i rather look at the individual names
like you said
yeah i think that makes sense okay good
american airlines um
you know some of the news that was in
the airline sector was
you know they were restoring the boeing
max fleet
um some people see this as good news i
don’t know about that
um uh the reopening basket especially
airlines has been breaking out that
depends entirely that depends entirely
on whether or not the plane crashes or
not
yeah 100 if if the plane crashes that
that’s bad
yeah i i’m not a big fan of the boeing
max at the given time
so this reopening basket that i’ve been
keeping an eye on you know airlines
especially it’s been breaking out on the
daily after some nice consolidation and
confirming support
this is you know this is my a plus when
something’s breaking out on the daily
and it’s setting up on that given day
this is
what i really look for this is you know
kind of what i’m
molding my career off of
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um so some of the other airlines we have
spirit we have delta we have ual
you could see the dailies they were all
breaking out
um again this is the type of action that
i’m looking for it’s getting ready to
set up from the prior week so i’m coming
into the day
already you know stocking these names
um and you know one thing i’m starting
to think about
is how i can get involved in all of them
how i can take a basket going forward
you know we have a lot of tech that
we’re able to use it’s more so about how
i can actually
handle the risk accordingly and properly
that’s something that i certainly have
to work out so
the stats on aal the daily volume was 67
million
aurival at the time was 3.3 certainly in
play
especially for you know airlines that
have been kind of
a little bit slower in 2020
um atr 0.76 short float 28
so relatively high you know some shorts
can be getting squeezed
especially as we grind higher um the
float 502 million
institutional ownership 50 so that what
that tells me is
i want to make sure that something is
setting up across multiple time frames
because a lot of these institutions
you know they’re not playing on a one
minute time frame they’re playing across
multiple days multiple weeks
months years from my understanding so i
want to make sure that it looks good
on some bigger time frames like the
daily the hourly the weekly monthly
so on and so forth so here we have aal
this is a daily again we’ve kind of
already seen this i’ve kind of already
shown this but
you know we have this gap up and then
you know we pull back in for a few days
and then we’re gapping up on this given
day on elevated volume
and we’re kind of breaking out of you
know this flag i’m not going to say it’s
perfect it’s only two levels
uh but we are above this 1510 level
some prior resistance so that’s kind of
more important to me than anything
um here this is kind of how i set up
things we have the one minute the five
minute the 15 minute and the hourly
and you can see we get this opening push
i’m not a participant
some you know probably took this 15 20
break risking off low of day for some
momentum
type of position that doesn’t
i don’t really i’m not really
comfortable with that at least as of yet
so
i didn’t feel like i missed out i didn’t
think you know it was that great of a
position
um we then pull back in we kind of break
down
and this can get some shorts involved
you know some longs might have stopped
out
and then we start to build some higher
lows and you can see we end up breaking
out
because it broke out so early it was a
it wasn’t
perfect on the 15 minute and this is
actually what caused me to only take it
with 20
of my daily stop as opposed to 40
um and that’s something i can certainly
work on the more experience i get
with you know these names and you know
it looks good across multiple time
frames on the day and that’s what i want
to see
so you know some of the things that were
in my favor is there was a playbook set
up
and there’s that daily flag set up and
that multiple time frame set up as well
on that given day um
the reopening basket has been breaking
out it pulled in and held support on the
daily so you know
other airlines are breaking out that’s
you know something in my favor certainly
there’s that daily flag set up there’s
that one 5 15 minute setup
there is a risk reward of around five to
one at least with the targets that i’m
you know keeping in mind this is very
scalable
you know down the road who knows maybe
this is something that i’m taking
bigger idea with you know a hundred
thousand shares plus
if not you know at least you’re able to
do so
if you wish to do so yeah i like your
thought right there a lot i like you
thinking big i love that
can you think what’s bigger next for you
so what what is that next step for you
you have to say it out loud but think
about
being in that next big size for you
that you can handle right now that makes
you feel a little bit uncomfortable
but is still responsible and still keeps
you in your guard rails
and and go for it that’s how you get to
that bigger size i i find that i’m not
saying this
is true of you at all
kyle but maybe it’s true some of the
people that are listening which is you
know people say oh i want to be a really
really big trader well big traders used
to be small traders
big traders used to be small very
consistent traders
and then they became a little bit bigger
very consistent traders
and then they became a little bit bigger
consistently profitable traders
yeah certainly i i will say that the
next step for me on
a similar position like this i’m not
it’s not share size but it’s instead of
taking out twenty percent of my daily
stop it’s taking it with forty percent
of my daily stop
and you know as i continue to progress
that daily stop does get increased
um so that is an area of improvement or
you know yeah and think about i know
you’re a former high level pitcher so
my son loves bait my son my son loves
baseball
what would you think my son is seven and
a half what would you think if i said to
you oh yeah i took my son out
and i had him throwing from 60 feet six
inches the
the high school mount no we we go out
and
and we throw from you know the
little league mount and sometimes we
even
throw from a little bit closer and then
we we work our way back up to the little
league mount
um not suggesting you’re in little
league at all but
uh you know you want to succeed you want
to win
that’s at smaller levels and then
and then bump up so good good i love
that you’re
you’re identifying a trade you can
really build your career around
the final thing is i can get in and out
exactly where i want
even as i get bigger down the road it
had a one cent spread
plenty of liquidity exactly what i want
to see
um so how i handled this is
you know i took and i’ll show the tape
as well is i took this
flag break right here with 20 of my
daily stop
risking off this low i think it was 15
15 i’ll show it in the tape
um this is something i should have been
taking with 40 of my daily stop as
opposed to 20
and if we got if we pulled back into
this higher low and
you know put in a lower high and then
broke down i can cut half and then cut
the rest at
this you know full 1r stop um so that
that’s something i can certainly do
going forward but i ended up selling a
third
into 1570 and then i split my second
third into two even lots
and then you know i just got out the
rest
and you know certainly area of
improvement especially
you know thinking bigger idea not only
on this given day but you know it was
holding up incredibly well
it pushed away from price exactly like i
wanted to see
and it closed near highs and you know a
few days later this was like 1850
1860 so you know something to think
about
all right so you’re in
and we get a move above the
the high which is instructive
uh we hang out a little bit and then we
make that new high we make that push to
1580
off to 1560 excuse me just in front of
1560.
you know when i see that i see the high
i see the hanging and then i see the
push higher
when i see that i think to myself boy
i’d like to be better i don’t want to be
i’d like to be bigger i don’t want to be
bigger at 1560.
but boy i probably should be bigger and
so i look
to where we broke out from which is you
know around that
35 cent area and because it made that
good push higher
i’m going to look to look at the volume
if the volume is is really good i’m
going to feel more confident
but i i definitely have a trade decision
when it pushes up to 1560 to
bid in front of where it came from
because i should feel better about it i
want to get in the habit of bidding
36 cents 37 cents 41 cents it depends
on the move depends on the volume
depends on how good i like the stock
for an airline stock i’m going to be
stingier
about wanting to get better prices if it
was a
tech stock i wouldn’t be as stingy
because there’s more reward for it but
the airlines don’t trade as cleanly
just like the pot names don’t trade as
cleanly
certainly all you need to do is look at
cgc today
um and know what i’m talking about but
certain sex just don’t trade it clean
like you know this is going to trade a
little bit cleaner because it’s
super in play but i think about that you
know if you are looking to get better
think about when it’s making those new
highs and they’re impressive
can you bid in front of where it came
from maybe you don’t get hit but maybe
you do
it’s a good best practice to get in the
habit of doing that we’ll get
you will get hit more more times than
you think uh-huh
and then what would you do with risk is
that separate from
the position that i took initially
it is it is separate you’re going to
have a different stop
and a different strategy for that
then there are multiple ways you can
handle that i’m not going to
not going to tell you there’s a best way
there isn’t
but yes you want to have a different
target and a different stop for that
yeah that’s something i’ll certainly
work on and
for sure okay so we could get into the
tape it’s you know pretty slow
it’s a pretty long position but i’ll
kind of show me getting involved in it
um and again these are the positions
that i really like where you know i can
get involved right at that timing point
it should kind of work right away and
then maybe i can take off a piece and
you know cover my risk and then
i’m kind of playing for that bigger move
and if i need to
step away to go to the bathroom i’m not
so worried about it
because you know it’s kind of a slow
grinder
um it kind of some it’s something that
fits my personality a lot better
so i’m looking to get involved kind of
over this
1535 level this lower high i believe a
lot of you know shorts
should be stopping out and some momentum
longs
will be getting involved my risk is off
15 15.
um we could kind of just see the tape
you know big bids and big offers this
offer is starting to get eaten out a bit
and i could probably already be long at
this point you know
so i get long at 15 34
risk off 15 15 and we start to
kind of push and
you know i could fast forward a little
bit but we’re starting to work right
away
and i’m thinking okay once we get some
type of
you know momentum push through high of
day maybe it sets up and
you know then we start to see a shift in
character
i’m going to be looking to take off one
third
and i think that pull in where
you talk about maybe bidding for some
price
should be coming up we might have heard
it pasta
i think at this point is where i can
have some bids out to you know get hit
possibly like you said
to get a little bit bigger you know we
had nice volume on this breakout
so that’s an area of improvement
certainly
and then you know it’s kind of just a
slow grinder
um you know we pushed to 1560
1563
and i should be taking off a third here
i take off a third into this push into
1569.
and it’s just kind of a slow developing
play these are the plays that i really
look for
and you can see i have you know a third
out there and i fell
and then it’s kind of just a risk-free
position at this point and i kind of
just want to see how far
i can take this and often i’ll use
something like a longer time frame like
a 15 minute
you know we put in a lower high on the
15 minute and then break some key
support often that’s my signal where
maybe this position needs a rest
and it’s time to move out of the way
and this is kind of where i end up
getting flat
so definitely some improvement in this
last third
i kind of got out in front of kind of
just a one minute
breakdown i should be using a longer
time frame like a 15 minute that’s
certainly
an area of improvement what was the blue
line
in inside of reading the tape the simple
moving average
oh yeah that’s a 9 ema okay
yeah that’s something i use
it’s something you use for exits um it’s
something i use to determine
if something is overextended
before it needs to set up okay so right
here
this blue line is you can see that it’s
tucked up underneath on the one minute
on the five minute and on the 15 minute
it’s a little bit extended on the hourly
from where i’m getting involved
it just kind of gives me a good idea of
what time frame players are possibly
getting involved and does this need to
first reset
into something like the 15 minute
and then when i’m actually involved in
that position i will use
it across multiple time frames you know
if we put in a lower high let’s say on
the 15 minute and then break down
that’s kind of a cue to maybe move out
of the way
so that’s kind of how i use a 9ma i
don’t really overvalue it
it’s just an indicator that kind of
helps me out
something i can do better down the road
is i can think of ways to position
myself in a basket even if that’s only
two names you know i could have taken
ual and aal
um that i could have been you know 20
bigger
just by doing so i don’t need to be in
you know all of them that might be a
little bit overwhelming for me at this
current time
but maybe taking one more especially
when they’re both setting up really the
same exact way
and airlines are breaking out
and i can also think of ways to possibly
take some
a bigger idea on this maybe in a swing
account down the road
but that’s something i’m going to work
on down the road
the main area of improvement is on that
last third i should have been holding
for
you know when the 15 minute gave out
instead of something so small like the
one minute when that one minute put in a
lower high and then broke down
that’s when i ended up moving out of the
way completely on this position
it just strikes me as if i ask you
you know what is the defining variable
as to why this trade worked
what would you say it was i would say
that these airlines were all in play
because
of the news of boeing the boeing max
coming back out
and that they were all breaking out on
the daily okay and i
i’m sure you’re gonna do this but for
those watching
can we go back to that chart and
and and and uh hitting home this point
to you
for your playbook that’s something that
you want to be remembering this was a
really good trade
let’s remember how the daily charts of
the other names in the sector were all
lining up
look at how those daily charts are
lining up and
look how well i did when they were
starting to
break out together at the same time yeah
i mean
in the last couple months airlines this
has been the cleanest setup across
a sector that i’ve really seen for my
current playbook
um so this is something i’m certainly
looking for
you know when the next sector wants to
go off a little bit hey go ahead and
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