POT was in an intraday downtrend. It looked horrible on the intraday chart. 140 was a huge technical level on our longer term charts. 140 became a humongous intraday level and guys were buying both hands at a time near and around 140. I tried to tweet the unusual buying on the tape, but Twitter was on a siesta. It held the 140 level 5 times. I was long, with the guys buying with both hands. We were joking on the desk how impressive their buying was. POT looked like it should have went much lower but for all the buying.
When POT breached the intraday low of 139.90 I got stopped out. And when POT held below 139.90 I started a short. It was broken on the intraday chart, below the important longer term level, and below the buying catalyst. POT had the potential to melt.
But it didn’t. The buyers kept buying. The melt never came. Every ten cents found another impressive buyer. So I was short but not heavy. There was just too much buying. And heck I was starting to root for the longs. Man were they strong.
We covered above the 140 and started longs again when POT was holding above 140.50. We will see.
So when you see that much buying on the tape, we stay short, but not for size. And we acknowledge that with this pattern a significant reversal may be next.
As for now, POT below 139.50 is a short. Holding above 141 and we add looking for an uptrend to manifest. We cannot control the outcome. We can just make excellent risk/reward trades and observe the market while we are midposition.
Mike Bellafiore
Author, One Good Trade
7 Comments on “Lots and Lots of POT Buying”
thank u…just got some at 141.01…lets see if it holds
I don’t get why you short if buyers keep buying. Is it just a pattern recognition thing? Or do you think the buyers will tap out and hit the door? Thanks
We got short because the buyers at 140 had left. POT hit a new low. We expected selling to follow. Didn’t happen. We stayed short till POT regained traction above 140. Sometimes there is a delay. The buyers fight but then have to throw in the towel. But again didn’t happen here. Good for the longs! Gutsy.
Shorting in a strong overall market and overall sector seems more gutsy to me. Thanks for your reply.
although this is after the fact, I was watching the 139 – 139.50 level. If you look back to when BHP made the offer, this level has consistently been defended and attracted more buying. POT also gap down below the October 22ish support level so to me the next level of support was 139.50, which is where buy programs seemed to kick in.
for full disclosure I didnt get to trade this. so just an observation
good trading
Hi Jimm, I think this is due to the fact that the stock was in play. It had fresh news that brought it down in the AM and was possibly breaking a very important level, in other words it was going to go where it needed to go regardless of the overall market, notice how it is still down 3% while the ags are up. Just my take.
Good trading
Hey Tarhini, I believe you would be correct. Sometimes I think afterhours can be misleading on a stock though. That’s where alot of the loss came from. On a risk/reward level I just don’t see the benefits outweighing the downsides. Of course, since the market is so high today there is a chance POT could drop with the overall market on a correction. Thanks Tarhini.