In this video, learn the Daily Breakout Trade Strategy. See a new trader, with feedback from Mike Bellafiore, break down the variables for a profitable Daily Breakout Trade in the airlines.
View Video Transcriptin this video learn the daily breakout
trade strategy
hi i’m mike bella fury co-founder of sme
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 new trader with feedback from me
break down the variables for a
profitable daily breakout trade
in the airlines let’s get to work on
sharing these important trading lessons
so you
can grow your trading account
[Music]
we took a daily breakout trade on aal
last friday so the trade strategy is
pretty simple we look for an important
technical level on our daily charts
a news catalyst elevated arvol
some volume spike into the breakout
a sharp move away from price holding
above v-wop
decreasing volume into uh pullbacks
buying on the tape into the pull ends
short interest on my side option flow
with out of the money strikes
a hold until there’s a reason to sell
and
you’d want the market in your favor and
corresponding
stocks and sectors supporting direction
and obviously a hot sector
so that’s a very good breakdown
of the variables for a trade that’s a
very
professional breakdown i actually got
an email sent to me by somebody who said
they were a consistently profitable
trader wanted to understand how they
could become
even better and when i shot a few emails
back and forth to this trader
it turned out that this trader didn’t
really
understand when they were more likely
to be right this trader didn’t really
understand
the variables that go into
their a plus trades this trader didn’t
really understand the variables that go
into their
winning trades you need to know that
don’t write me an email don’t ask to
talk to me at the office
about how you’re going to be more
consistent and how you want to be a
seven-figure trader
and how you want to be a big trader and
not be able
to answer those questions i can’t take
you seriously
you’re a if you don’t know that
the idea that you think you’re going to
become in the lead trader
and not be doing the work that yani’s
doing right here and yanni you’re an
intern correct
yeah i’m gonna answer okay this is an
intern
and this you’re a junior intern correct
this is the first this is your first go
around
at the firm he’s this is he’s he’s in
the first stage of his internship
these are the variables that he’s
putting into his trades to get hired at
the firm
you’ve got to stand out as a junior
intern then you’ve got to stand out
then you got to get an invitation to be
a senior intern
when you’re in college you got to stand
out there and then get hired
okay he’s just starting you need to
understand when you’re more likely going
to be right
okay you need to be you know in this
i don’t mean to call out the straighter
and i say it this way because
people tell me that they want to be good
and my response to them is all right if
you want to be good i’ve got to tell you
the real truth
i’ve got to be honest with you you’re
what you the work you’re doing right now
not good enough
if you can’t tell me that stuff not good
enough not going to happen for you go do
something else
because we’re playing for keeps here and
i was struck yani by actually
the work you did here because this is
really good this is this is a really
good layout
of a very specific example of a trade
that you’re going to take
and you can tag a trade like this and
you can measure a trade like this and
you can get stats on a trade like this
and you can know for your trading
whether or not you can build on this
very specific trade
okay so for those of you out there that
aren’t doing as well as you want or want
to do better
here is a junior intern showing you the
way next we got the potential reasons to
sell
so if the price target is reached on a
breakout trade like this
you want to sell into strength but if
the stock goes against me i look for an
intraday
uptrend to be broken breaking news in
the stock or
in the market an unusual seller on the
tape
or a daily uh 10 day sma failure
or on the one hour chart i look for the
50 sma
ema to be broken if you want to learn
three more
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 now
at the top right hand corner of your
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don’t worry
you won’t lose this video you can also
visit
tradingworkshop.com to register for this
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you’re going to learn more in a couple
of hours from this trading workshop
than from years of online education so
the trade plan is very simple
uh we look for a buy buy a flush into
pre-market
support pre-market support risking low a
day
adding above the opening price or the
breakout
price uh and we look to scale out into
strength
as you guys get a little bit more
experience how you’re defining
opening price is going to be important
i’m sorry how you define adding above
opening price
uh you will add some more nuance too so
you’re not going to add every time
something gets above
the opening price you’re going to be
more selective about when you’re going
to add above the opening price for
example
let’s say that something moved
to atrs on low volume to then
above the opening price you’re not going
to buy the opening price then
if something’s moved to atr’s in a
really short period of time
on low volume and ticks above the
opening price you’re not going to buy it
all right and that and that’s a
different setup than
stock gapped up it was consolidating for
an hour
uh really close to beneath the opening
price and then gets above the opening
price
that’s an a plus buy just
note that as you get a little bit more
experience we’re going to want to
be more nuanced and you’re going to want
to be more specific for your trading
yani
for for which of the ticks above opening
price you really do want to take
or add we’ll take a look at the bigger
picture here we
are in a trending market for the spies
uh spy was actually making a new
all-time high
the day before the queues were lagging
and the iwm is the strongest
the white house kobe 19 response
director
says that 65 of people aged
uh 65 and over have gotten vaccine shots
the center for disease control and
prevention says more than 100 million
vaccine doses administered in the united
states
and we also had some ppi data come out
which is pretty much
in line with expectations what’s it
telling you overall
you need to finish the sentence so the
biggest picture is
all these things what’s your conclusion
based on the big picture uh really
bullish
really weak up too much
gonna make my breakout trades more
likely to work less likely to work
what’s your what’s your conclusion yeah
since the market overall looks pretty
strong
breakouts tend to work and uh
and we’re in a trending market so i
think that’s important to note that
the spies have been typically strong
technology looks a little weak but other
than that
the broader market looks pretty bullish
yeah get in the habit of adding that
conclusion trade more likely to work
because of the big picture
so uh this is the airliners
the etf jets is what i like to track
and we have some real sector strength
this is the weekly chart for jets and
uh we have a strong uptrend and we’re
breaking out of this 200-day
moving average on the weekly and testing
the pre-covered levels
for the airliners so this is an
important breakout spot
for the whole sector as a whole so
here’s our technical analysis
for american airlines i’m not
going to pay anywhere near as much
attention in
jets as i would perhaps typing up
three or four of the largest airlines
and seeing how they’re doing to give me
some information
uh jets is not an etf uh as
as important as maybe the semiconductors
etf is
okay so that’s something i need to look
at um when i was actually taking this
trip i was actually tracking boeing
yeah i like that you’re looking for an
etf to help you
this just isn’t one of those etfs that’s
particularly helpful yet
as opposed to and look this is a little
insider baseball and there’s no reason
why you should know this and
certain etfs are better than others this
is just not one of those
that you need to rely on as much as some
of the others
you want to look at ual you want to look
at dal
hey how are they doing and
see if they’re giving you some
information as to how aal would do
okay because when i was looking at the
the airliners to trade al stuck out to
me the most because of just the
the daily uh pattern that it had but it
did look like a lot of airliners was
breaking out
so uh here’s the technical analysis for
aal
so in the blue line right here we have
the 2250 area which is the daily
breakout that we want to
buy into strength i mean that’s the
level that we want to buy at
um as we go i’ll go into the next slide
where it
has the one hour chart where it’s a
little clearer but i just want to point
out that we have a ways a way to go
to reach these pre-covered levels so
we highlighted in white the areas of
resistance where we might want to
sell into strength for this particular
stock so here is our one hour chart we
have the
2250 breakout area which was tested
multiple times and seems to be very
significant level
and then here’s our daily uh resistance
points where we have
clear areas of rejection once we get to
them
eventually we break those and we can see
that on the tape here’s our five minute
chart
we have the 2250 break and it tests
the view op right here on the opening
drive
we get a breakout above the 2280 area
and we trend and hold v-wap the entire
day
next day gap holds up
around the 24-25 area and then holds on
the opening drive as well
at the pre-market support area right
here and we had some explosive volume on
the second day as well
so here is the intraday fundamentals uh
american airlines
is one of the world’s largest airline
when measured by fleet size revenue and
scheduled passenger
uh carries and here is the statistics
for
uh stock we have an arvol i mean ideally
we
look for an arvo above two but the
arvold was decent and we did have a lot
of checks in our favor
so this is something that i would like
to take uh we have a 1.778
atr short float of 12
and um shares float
632 million
institutional ownership 51.7 percent
insider ownership 3.41 of the float
but uh the major catalyst for this uh
american airlines trade is that joe
biden yesterday signed
the 1.9 trillion dollars worth of cobin
19
relief uh which included 14 billion for
the airlines an additional 9 billion for
the airports and other operations
let’s chill down so good very good
detail here with your statistics
love if you do this on all of your a
plus trades
very underrated to be going over these
stats before each trade
because you will notice that certain
trades will work better
when certain stats are xyz one two three
for your trading so you wanna so for
instance short flow can make a huge
difference
short float can make a huge difference
as to how a breakout trade works
you get something overly shorted that
could
really run because it’s overly short and
if you were just looking at the
technicals you’re just looking at the
price action or you’re just looking at
the
the technical resistance areas on your
longer term charts and then it got above
there
and they think skyrocketed higher
and you didn’t know that there was a
high short interest
you’d have a different experience
trading that than whether you did have
it
or if you knew that this was in this
market
one of the stocks that people are really
talking about on the reddit boards and
the
wall street bets boards
and so i was gonna make fun of myself
about not really knowing what the reddit
boards
were but you guys can do that behind my
back um
but the thing i want you to i want you
to hone in on here yanni is
is there something in the intraday
fundamentals it’s unusual is there
something that was unexpected
was there more money than expected that
was doled out in the
relief bill was there more money for
airlines that was doled out in the
relief bill
was this news kind of known about prior
and is this just sort of the execution
of what was already known
those are things you want to be diving
deeper into
to get a handle as to how good the
catalyst can possibly be
so if this catalyst if we knew this was
coming
and then this was the day that it came
and all the numbers were the same we
wouldn’t really expect the stock
to play up that much because it was
already priced into the stock but
if for example we didn’t really know
that there was gonna be 14 billion
dollars
given airlines and nine billion for
airports and we really thought it was
maybe going to be
like seven and four and there was double
the money
well that’s a catalyst then that’s a go
catalyst
so think about that as you’re as you’re
moving forward what in the intraday
fundamentals is unexpected
and new to the marketplace that is going
to get big money to step in and start
buying so here’s our variable checklist
um so we had that important technical
level on our daily charts which was
22.50 that got rejected multiple times
uh we would want more elevated our ball
our ball was about 1.5 so i
i like to have above two for
something like this for it to be in play
but we have a lot of checks in our favor
so uh we did get a volume spike into the
breakouts
and a sharp move away from price off the
open and holding above v wall
which is really really important uh we
had decreasing volume
into the pullback uh buying on the tape
into pullins the market was in our favor
corresponding stocks and sector was in
our favor
uh news catalyst hot sector
short interest on our side it was around
12 which i think is
decently high for an airliner but
something that
i made a mistake on and we’ll cover on
in our trade execution in my
trade execution is holding until there’s
a reason to sell
i sold a little too early on this
breakout trade and we also see
some option flow with out of the money
strikes
so these are the out of the money uh
strikes i was talking about i like to
use something called flow algo it’s a
great thing i like to use to see
where big people are putting their money
and hitting
aggressive options so we see a bunch of
out of the money options being bought on
this day
and consistently throughout the day
which is also important
so that’s another check in our favor
when it comes to this breakout trade
so here’s my trade management i took the
breakout at
22.50 uh i sold
a pretty decent portion of my core only
10 cents higher
i have to get a little bit better at
reading the tape but
i was not liking the way it was reacting
at this price
at the time but we’ll go over that and
what i could have done better but my
other executions were
pretty decent sold chairs into 2282
which was
one of our resistance points and uh
23.25 which the tape stalled in this
area and we slowly chopped back up
so i’m happy with this execution but
with my runners i sold this
into weakness which i didn’t really like
it started to look
very extended on the daily charts and
also
um other airliners and related stocks as
a whole
so i sold that last portion into 2310
and
that was a really big mistake on my part
i should have
been using my reasons to sell for that
last bit
so here’s the ideal trade management
like we said we get long the 2250
add as it holds v up at 2260 which is in
this area
cell until pops where the resistance is
are
uh we could swing a portion into the
next day
these are different trades right and
this is this is something that you want
to be working on in the review so
getting long
at that 2250 area on the open is what we
call an opening drive play
and then buying that stock
as it’s holding v-wop after it showed
strength and
after it’s above you know it’s opening
range it’s pre-market range
that uh that’s a that’s a different
trade
right that’s a different trade and you
know if
time goes by it’s showing you strength
on the open it’s above the opening range
and you’re getting consolidation above
ewop that’s a good
swing trade
on the long side assuming you’re not
really close to overhead resistance
on the longer term charts that that’s a
that’s a very good
trade you know so
you know for instance uh if you
look at the sideways action from about
10
15 all the way until i can’t read what
time that is till
buying that support above view op a
little bit after 10 15
and trying to hold that into the end of
the day
that’s a good swing trade and a very
different trade the opening drive
trade is the momentum trade meaning you
buy it and you sell it when it slows
it’s a subset of a scalp
a buying into v-wop as it’s
buying it to view up as it’s holding
above you up in a stock that’s strong
that has good
as a good news catalyst and there’s a
good technical catalyst is
is a swing trade it’s an intraday swing
trade at a minimum
and and has different rules to it so
and i would tag them differently the
first one be open and drive trade second
one would be
a pull and trade pull and trade with the
news catalyst poll and trade with a news
catalyst and technical catalyst
whatever tag you think is best for you
so this is my uh trade review
uh what did i learn from this trade i
learned that daily breakouts typically
could trend for multiple days
or and near high of day like we saw
i need to look for reasons to sell as
this was a trade to hold
overall sector strength can give you
major clues to how the stock may trend
[Music]
how could you done better uh add size
when the tape was clearly holding view
up at 22.60
uh holding until there’s a reason to
sell
and i ideally look for elevated arvol
setups this was a little uh low volume
but overall there was a lot of checks in
our favor so
i’m not too unhappy but i would like to
see more
relative volume in the name yeah that’s
particularly important when you’re
looking at breakout trades technical
breakout trades
good to note that i like you thinking
about that i like you noting that
i suspect you will find much more
success trading breakout trades with
elevated volume
as opposed to less elevated volume
so how would you trade this differently
in the next trade
uh this day i was a little off
psychologically so i didn’t add too much
risk on this trade
so uh if mentally i’m feeling a little
better maybe this is something i could
size up and potentially in
um have less of a scalp mentality and
more of a
longer term time frame now this trade
trended for
uh two three days i have to think about
that and
move the separate the two trades like
you said where
there’s one opening drive play and then
the second play
is a pull into v-wep an intra-day or a
multi-day swing
and uh with that i’d like to hold more
of a core
100 totally two different trades
two different ways to attack that two
different playbooks you’ll have two
different results
with your trading to study
but good really good i i like your
approach here
really good setup great with the
variables
good stock selection excellent playbook
selection
excellent setup selection these these
are the trades
to really study and think about as you
build out your playbook
okay great thank you so much hey go
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