*****Editor’s note: Jake Huska is a college student working on his trading game. At SMB we believe traders should start working on their trading game early, just like pro athletes. Jake’s posts reflect a better journey toward becoming a pro trader for the college student with a passion for trading.*****

It’s been a while since I last shared a trade review, which can primarily be attributed to the fact that I haven’t been trading as actively due to my school schedule this semester. However, when I am able to actively trade, I always like to share my thoughts on a particular setup and post my review of the trade.

The trade I wanted to discuss today is a trade I made recently in SWY on February 20 on the short side. For simplicity, I’ve listed the different components of this particular setup below:

• The stock had been up the prior four days.
• The stock was gapping up to old pivot highs.
• The stock failed to hold above the previous resistance levels.
• The stock then held below VWAP.

One reason that I felt this represented a decent risk/reward trade was the stock had been up the prior four days. While this in isolation isn’t enough for me to throw out an offer or hit the bid to get short, I know that a failure at a prior resistance level is more likely to lead to a pullback if the stock is extended heading into the gap up. Of course, if SWY was able to hold above prior resistance, I would no longer be looking for a short setup. But this did not occur.

The thing I really wanted to highlight in this review was the patience that the setup required. After clearly seeing the failure at prior resistance, I become more confident in the short setup. However, I then used VWAP as an indicator to help in my execution and help control my risk (which you can see in the chart below). While you definitely could have shorted the stock based strictly on the intraday failure at prior resistance, once the stock was below VWAP, this was another check in your favor for an intraday short trade. As a trader, you want to find setups with as many checks in your favor as possible. This will allow you to have more conviction and trade with more size.

Daily chart of SWY:

Intraday, 5 minute chart:

Please let me know if you have any questions or comments.

Jake Huska

Some previous blog posts by Jake:
How I Categorize My Intraday Watch List
Knowing Your Risk on Multiple Time Frames

No relevant positions.