There wasn’t a lot of fresh news today so the focus of SMB’s AM Meeting was Second Day Plays and Technical Setups. SDPs are setups in stocks that were In Play the prior trading day and tend to offer some well defined opportunities for a few more trading sessions. TSs are setups based on a longer time frame technical pattern that may trigger intraday. One of the toughest things for a less experienced trader is whether a TP is “working” and worth their attention intraday. A good rule of thumb is to look for unusual volume in a stock prior to its reaching the longer term technical level. Often, the momentum players will start accumulating a position prior to a stock hitting the key level so that they are in a position of strength by the time others are jumping on the bandwagon. This is especially true for momentum type names like LULU, NFLX, DECK, and FOSL to name a few.
In today’s AM Meeting the first TS discussed was LULU. If it were to have a strong opening drive that would be our clue that the technical setup, which was a break above 81.50, would bring a move towards the all time high near 86. On the Open I was watching my overnight RIMM short as well looking to get long POT into a pullback to 57.80. I missed LULU’s opening drive to 81.50. I was a bit disappointed but not overly so as I believed both RIMM and POT had major potential for moves today. The experienced trader sitting to my right said “are you trading LULU?” I grouchily replied “NO”.
I started to watch LULU which by 9:50AM was a top several categories on the SMB Radar. 
I had missed the initial 3 point pop, but would I find a way to work my way into for the second leg. Truth be told I knew I wouldn’t participate in the second leg as I was about to get up from the desk to work on firm business. But this was a scenario that should have any experienced day trader watering at the mouth. A momentum stock has shown you the strength on the Open. In case you doubt your own eyes just glance up at the Radar which confirms LULU’s strength and high IPR (In Play Rank). This is a stock where you focus your attention. Start to do the math in your head. Is there a 1:5 risk/reward trade to be made? Of course there is. Probably a 1:10 if it has a decent horizontal consolidation after putting in the morning high.
There are very few people who consistently pull money out of the equities markets each day. If you are one of those who has already made it to that level and want to achieve a much higher level then start working on the following skill. Identify where the “big money” is flowing (@TraderFlorida repeatedly and almost annoyingly discusses these names). Understand these are the stocks that can dramatically change your weekly, monthly and yearly performance. And I’m not saying it will be easy. I can count the number of traders on one hand we have trained in the past 4 years who have shown the skill, balls, and mentality to crush this scenario in LULU or the other momo names mentioned above.
11 Comments on “A LULU Lesson”
I like your candor. Thank you for it, sir.
LULU is an IBD 50 stock, so I look at it at least once a week no matter how it’s acting. It’s also been on my daily watchlist since March 10th. Been stalking it for a swing position. Almost bought in on the 16th when it broke 80, but there wasn’t any follow through and the SPY was death. Then I lost a little money splashing around in it Thursday.
Toady my alert went off at 80.75. I was too scared to jump into the opening move, I really wasn’t expecting it to go so far so fast. Bought heavy at 82.4 during the first pullback. Sold 50% of the position at almost 86. I really wasn’t expecting the entire move in one day. Lots of signs point to the SPY moving lower in the coming days, hopefully it’ll create an opportunity to score more LULU around 83.
Frankly I thought this was an easy trade that gave traders almost a month to prepare for it, but the narcissist in me will accept any complements about taking the trade.
Will SMB Radar be offered in a program like style instead of the webinar style? Also, will there be features where you can adjust the volume settings etc?
Thanks
I was also looking for the 57.80 level in POT. In fact that level was on my radar in the last week. Every time the stocked gaped above that level and I was bidding between .80-.90 I got ripped. When it broke on the upside that level and bought it ‘market’ – got ripped!
On Monday I said I’m a complete idiot of doing so again, especially after accumulating between 58.00 – 58.10 with a stop between .96-.99. It even crossed my mind that if I were on the SMB floor, you would say, like you did about 6 months ago in a post ‘there are many ways to be silly’ – ‘anyone buying that .80 level (again) should be looking for a new job!’ (the original quote was ‘anyone shorting…’).
Steve, can I ask if you looked for a long and bid on the 2nd 5M bar in the 50ish area (level highlighted by the T3) or did you tried to accumulate above 58.00?
Thank you Mr Spencer (two first names?!) for a very informative post.
“A good rule of thumb is to look for unusual volume in a stock prior to its reaching the longer term technical level. Often, the momentum players will start accumulating a position prior to a stock hitting the key level so that they are in a position of strength by the time others are jumping on the bandwagon.”
Great example with LULU. Always some money info on the SMB blog.
Thanks again,
Michael W
Ovidiu,
I got hit on the bid at 57.82 as the market opened. I sold it when it couldn’t hold above 58. I bought it back around 57.50 and sold it again when it failed to hold above 58. When it finally started holding above 58 I got long but eventually was stopped out of my position.
LULU was a MUCH better stock based on its price action and volume on the open. It was worth switching your attention to it for the rest of the day. Let’s not over complicate this.
Steve
There will be a desktop version released shortly. It will link to your trading platform and charting software. It will not be programmable. You will receive the exact same information that the traders on our desk receive.
Steve
Rob,
The fact that it is on your watch list is a good thing. The ability to trade it will come with more experience. Good job recognizing the accumulation around 82.50.
Don’t make the mistake of thinking if the SPY is weak that every stock will come in.
Steve
“And I’m not saying it will be easy” and that is a very good point..
Thank you for the reply. You are right not to over complicate it, especially as it wasn’t a stock in play. I couldn’t switch to LULU because I only have access to nyse stocks.
Best,
Ovidiu
besides traderflorida, what are a few others for finding stocks in play?