In this video, learn the 3 best trades in a breaking news opportunity with a space exploration stock, $SPCE. Two developing traders work together to share the best trading opportunities in a headline news event for you.
View Video Transcriptin this video learn the three best
trades in one breaking news opportunity
with a space exploration stock 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
two developing traders work together to
share the best trading opportunities
in a headline news event for you let’s
get to work on sharing these
game-changing trading lessons so you
can grow your trading account
[Music]
we did our playbook on space sell the
news um opening range breakdown
by me and sebby so laying the context to
this day
um first spy was gapping near all-time
highs and q’s was
gapping right below all-time highs
that’s not too relevant to this trade so
we’re going to focus around context
about space um just because it trades
more away from the beta names so space
announced a 500 million dollar at the
money offering two minutes before the
open this day
and that’s the most relevant part the
second part is that
a few days or about a week or so prior
space had garnered a ton of attention
after getting
faa approval to fly customers into space
on june 25th and that day space moved
over two atr’s
with a daily volume over 250 million
wasn’t there a big event
the day before coming into that weekend
because this was a monday trade
uh mr branson flew to space the first
orbitals flight with this group
so do we think that’s an important
element
to archive for this trade
and this is the day after yeah
that’s right and that’s important
information so we agree that that should
be
that should be on there okay yeah look
and the reason why that’s important is
you’re going to go back
one of these days and you’re going to
look at
these types of trades and you’re going
to want to make sure that you’ve
archived the most important
point so you can go back and study right
okay
and then so this is the daily chart for
space um
you can see the very high gap on the
25th from the news
uh it’s important to know that when
people were kind of getting along
from there uh after the gap and trying
to
enter the stock on the long position
that they’re most likely likely
risking below 43 as that kind of held
before a very important level and it was
also holding its range after the gap
so that’s a really good technical level
that’s a really important technical
level it’s a really good job of
recognizing that important technical
level
that is going to be if we didn’t know
anything about this trade
and we just said here’s a chart
here’s the long term chart you know what
would you do if this stock got below 43
you could probably you could make a
trade with edge
just by looking at that longer term
chart i mean that’s
that’s a significant level and you want
to be thinking about that you want to be
thinking about
hey if this is at a particular price you
know how much
edge is there in terms of where it is
for its long-term charts
that would be that’d be a lot of edge
below there right
and that’s exactly like the psychology
of the trade exactly what you mentioned
a lot of longs are positioned especially
from that day one
and from days after clearly defending
that 43 area
and so from a psychological standpoint
if we are to close under 43
that a lot of longs are going to be
trapped and you would see panic selling
and so with that hypothesis in mind it’s
worth
holding a core for a bigger move
and we believe like that’s the main part
of this trade if you want to learn
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uh so this is kind of more of a zoomed
in time frame we can see that before we
did have kind of a few
lower highs here being done and the
important level to
note here’s 54. you can kind of see that
after the gap
up we had we were struggling to hold
above it and especially
on the middle friday there we were
trying gapping up again of 454
and we retested it on the open and just
completely flushed
and then from that day on it’s been very
respected
going through the fundamentals of this
trade um average volume
37 million institutional ownership 26
percent
atr of just over five float of 170
million
and short interest probably the most
important part is 17
so the concept behind this trade is sell
the negative news that means
what should we look for in terms of
intraday price action we should see
high aggressive selling right off the
open especially because the news broke
two minutes in the pre-market
two minutes before the opening bell and
so the two best possible scenarios
are one like first move higher get
stuffed you know sellers are up there
you know like that um they’re selling
this aggressively
and we can push through on an opening
range breakdown or we just sell
immediately right off the open
right like a lot of these lungs are
trying to get out just flatting
so our game plan scale out 80 into atr
so we don’t know how deep
this is going to swing until that 43
level
that’s the inflection we’re looking for
and then we’re holding 20
for that core to see if we close under
43 do we see day two day three selling
and reasons to sell high volume
capitulation failure to sell on any real
volume
pay yourself and then high volume moves
to the upside well i can think of a
better
trade can you think of a better trade
you see you said the two best scenarios
for the setup are
and then you name two scenarios but i
can think of a better one
the balance too
anyone else get big into the clothes
swing it overnight
anywhere else
um so why are you waiting for the open
oh sure market yeah
why not just short it when the news hits
we’re not allowed to trade pre-market
right now
okay yeah um if you were allowed to
trade free market that’d be a big trade
do you think that would be you know and
when you’re play booking this trade do
you think that would be
a scenario worth thinking about
definitely
yeah and also you know if something’s
trading a lot in the pre-market
it will trade more like on the open
so if you’re you’re a little bit younger
in your career and you’re hesitant to
trade
in the pre-market but something really
is trading a bunch in the pre-market
it’s going to be easier for you to trade
than something that has very light
volume
so yeah that strikes me as
you know you know for news like that you
want to be thinking about should you
just show it right away
all right uh it’s important to go over
kind of the story for the first 15
minutes
you can kind of see we did sell off in
those first two minutes uh before the
market open
and um we do try and we stuff at 51
try and push higher test pre-market
highs see if we can go and
we immediate we immediately reject the
51 level
and the cell pressure just steps up and
you can just see
how strong each of these bars are with
all the volume coming into them too
there there’s not that many wicks on the
first few bars
and it’s just immediately strong cell
pressure from the open after rejecting
51
and we immediately start pushing down to
pre-market lows which is 49 on the day
when you look at that 51 level on a
scale one to ten what would you give it
uh i’d give it a seven eight okay i want
to give it too much importance but
uh notice that it is there yeah what’s
the trend in the pre-market
yeah down because we did gap up and 51
is the
low of that area right
uh of the pre-market that’s 50 right
there
okay where the kind of the two bases
there the 50.
yep um so you’ve got that 51
and then 50 is is below the low
and it’s important to know that kind of
like pre-market trading
we can notice where their bids stepping
up inward then let go by and 50 was that
point that we couldn’t know
it looks clean there in the pre-market
though
and it’s interesting because we just
open up right at that 50 from the two
bars of selling before
okay
and so for the rest of the day some
other entries that could have been so we
have that first selling off
which would be difficult to catch if
you’re just not immediately selling the
news especially because it happened two
minutes
with to the open we did get that major
selling off and then we do start forming
a
one dollar consolidation after we do get
a circuit breaker and limit down where
we just opened up neutral on the day
and that can give you a good area to
risk off of where you can kind of enter
on the high of the consolidation
and then play it for a further breakdown
and at that point when we’re reaching 41
we’re almost at that one atr level so
it’s kind of getting close to
you don’t know how much further it can
go but you can still have an open mind
about it
and then the important thing to note is
that around
30 minutes within the open we do push
down and
have our first kind of catch where it’s
at 4180
when we slip below 50 to 42 but we can’t
push farther any
farther down and then we test 42 again
and we re-bid 41.80 and it kind of acts
as a double bottom
where longs were getting in a little bit
more strength and we kind of pushed back
as a meaner version
and then afterwards we were still so
weak afterwards that we didn’t even
reach view up and we kind of set up a
base at 44 where the top was 44 and we
just couldn’t push any highers offers
weren’t lifting
and sellers were just being able to keep
price below that 44 which is important
and as adds another area of entry
and uh interesting to note that we were
we are below that 43 level intraday
where
sellers or uh longs from prior were
thinking about
cutting their positions and are
underwater now and
evidently what do you think about a
stock that opens up
and trades from 50 down to 41.80
and then bounces and can’t get above
what price 44.
yeah so what do you think about a stock
that that trades off
you know and from the pre-market a
little bit and then
right on the open from 50 all the way
down to 42-ish and then bounces two
points like
just just that and of itself it’s still
very weak
yeah that’s not much of a bounce yeah i
mean look how steep it was
yeah it could have you would you would
look at a chart like that and be like
even if went up to like 47 it would
still be weak
even went up to 45 it’d still be weak
i mean it’s just it’s not it’s not a
bounce at all
would it be a better term for it would
be a retracement
yeah and i mean yeah it’s a very
it’s a very weak retracement i mean it’s
it’s not much of a
it’s not much of an up move it’s a good
really good question it’s actually
when something’s that steep to the
downside from like
52-ish 50-ish all the way down to
42 and there’s not a lot of time that’s
gone by
i think most people would do use the
word bounce just because
retracement is more it was weak
it was like kind of steadily weak and
then it had
a little bit of an up move it’s for
something that isn’t so volatile like
that
it’s it’s for something that’s more
trending um
and then you can kind of just see like
how weak it was that we closed very weak
on the day at near low a day
and just overall sellers were very much
so in control of this day
so the ideal trade management here is so
you can size in on the opening reach
opening range breakdown
and you can put a stop at that 51 stuff
and let it play down to the downside and
then
just let it break down with it and then
see more of our ball
increase throughout the move we want to
get rid of at least 20 percent
in 25 increments ahead of the atr so
that we can cover
and the interesting aspect is i haven’t
we
we haven’t seen this in a while but with
the stock at 47 the lrp
down it was interesting seeing how to
manage around that especially because it
was just so volatile within the first
five minutes
so we want to cover and going into that
and another ad that you can have to the
core is into that kind of one dollar
consolidation
after the opening range breakdown this
can be a separate trade that you can put
on a on a joint account or
in a different account that you have but
the stop for this would be the top of
that consolidation
and you can scale out and treat it more
of a momentum trade into the lower days
and kind of trade it when you see high
volume
on very extended bars coming out
and then with the close under 43 we’re
looking for a gap down
from another from another day to atr
move so we’re looking to hold some
overnight with this move because of such
the week
such a weak close why we wanted to
highlight this trade
was so sebby and i trade completely
differently
and our styles are completely different
so working together to extract more p
l from one idea is kind of like the
overlying theme behind this
and then moving forward for the both of
us the goal is to carry this philosophy
forward and talk to traders with
different perspectives
to expand our respective edges tell me
how you work together to
yeah so i’m more of a i guess intraday
swing type of trader
and so the push to sebby would have been
like
the hold overnight um and the entry like
right off the open that opening range
breakdown is something that i take a lot
like
um entering my positions within five
minutes after the open or so
um and then his push to me was that ad
and consolidation
so usually when i’m in positions i don’t
like add i
just let it run and so like thinking
about where can i get bigger
where can i where like where am i
missing key spots where
that like that i wouldn’t even catch um
when you go back and look at that
and what’s what’s like the very best
trade you see in that opportunity
to me i i see like the short off the
opening range break down and then adding
into the close for the gap down
which one do you see is the best um
those are two trades so which one if
we made you choose which one would you
choose i would take the gap down
over the the opening range breakdown
okay
uh sebby which one would you take for me
it’s
the uh consolidation breakdown into
lower day where you can have a clear
risk area
just because the move happens so fast
that i’m not if i can’t
if i’m not playing reactionary to it i
want to analyze what happens after a
while and get a good
point to risk can you show me that
uh right there
45 i don’t know if you can see
this would be my clarity to risk right
there right there with that pointing
it’s
hard for me to it’s hard for me to like
visualize that
after the first i’d say it was a 10
minutes
so i’m sorry just circle it right here
sorry
right there after the first 10 minutes
after the first 10 minutes we failed to
push any lower but we start
consolidating for the five minutes
and it gives us a clear error risk off
of
that’s the best and easiest trade for me
but then also working with brian
sometimes i overthink these open dives
and breakdowns
and the way he has it set up is much
more simple and it’s not
expanding as you don’t need as much
mental capital to worry about the trade
what about if you could trade in the
pre-market if i could trade in the free
market
especially after we gapped up so high
after the richard branson news
uh after fading from like 52 i would
trade
after the initial 28 minutes after when
we got that used that
so if that news hit and you could trade
pre-market you would have hit that that
would
i would have hit yeah that’s
that’s a i think there’s three really
great trades here i think that one is a
really great trade
the breaking news trade you can make a
ton of money trading like that
you can build a career off of that you
know the story
you connect the dots it hits the tape
you know this thing is gapped up if you
look at our longer term charts got a lot
a long way to go to downside you can you
can
you can hit that pretty hard that’s a
that’s a great trade that’s an eight
plus trade
i think the i think the trade overnight
the swing trade overnight because it’s
not closing very well and it’s closing
below 43
i think that’s a good trade too i think
that’s a really good trade too
and i think the last one is it’s just
not really
bouncing retracing and can’t get above
you up
and this is consolidating beneath v-wap
for a low a day finish you know so it
can’t get above
i can’t see that i’m sorry and i did
just go get my eyes checked
is it 44 at the top of that range 44
yeah yeah so
it it tries to get about 44 three times
and it can’t they just can’t um
and that’s all below view up and it’s
all below of you up that’s too low
you know when something’s that steep to
the downside
your vwop is to is already going to be
drawing
at a line that’s too low
so you know the fact that it’s holding
below a view up that’s too low
and and then if you’re looking at this
just in terms of like intraday technical
analysis it can’t get above 44
44 is resistance
that that can be certainly made into low
of day
intraday swing short
for you guys those are those are three
worthwhile trades
i have trouble seeing
i i understand your trade i understand
your trade but you have to make
and and i understand the rules where you
can’t trade in the pre-market
i’ll talk to carlton um but that’s a
much better trade than
the rejection yeah the one that you want
to make there that’s a
the breaking news shit’s much better
trade for you and it’s fast acting so
you can use
you can use that ability to to hit it
hard quickly
right so those are the three best trades
i see
yeah i mean when you when you’re doing
these playbook trades
you’ll get better as you go along and
there’s there’s there’s
we’ll talk some more about that but you
know for the for the first couple of
times
we’ll get through that anyone have any
questions yeah
uh i mean since the news dropped at 9 28
do you think the surprise factor you
know maybe
you caught a lot of people offsides with
that news added to
you know how steep and how fast the move
went
like right off the open i think it was
surprising within the first two minutes
because at first i
didn’t think it was news i thought it
was just an imbalance that’s happening
two minutes before the market opened but
and then after reading uh after hitting
the headlines it was a much more
reactionary move no for sure
um i think that’s also why like we’re
talking about deep targets like that
just because it’s you’re gonna see panic
selling and if you’re gonna see penny
selling sustain then there can be day
two day three but yeah
for sure the surprise didn’t this go to
30
yeah the 20s yeah yeah
that was our last target 27. there you
go
good target thanks guys hey go ahead and
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