There are three ways short term traders lose money: incorrect analysis, expectancy (a certain % of trades just don’t work), or making trades based on emotion (this one is a biggy for most). Take a look at the price action from GMCR and QCOM after they reported earnings. Since the initial down moves on the Open one has been a great long and the other a great short. From my perspective one had price action that signalled it could be a good long while the other had price action signalling a short.
I would love feedback from both new and experienced traders on these two setups. I will conduct a webinar next week discussing the importance of understanding the difference in price action for these two names.
Steven Spencer is the co-founder of SMB Capital and SMB Training and has traded professionally for over 15 years. His email is [email protected].
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8 Comments on “Can You Tell The Difference?”
This is a really interesting and provocative question; it’d be great if everyone who reads it takes the time to think and respond.
Having never traded QCOM or GMCR but looking at the price action (and trying to ignore the comments on the charts!) after the initial moves up on 1st Feb I see QCOM going into a down trend and GMCR holding up. On the 2nd open GMCR made an attempt up which came close to the high of the prior day, whilst QCOM failed to get above the consolidation low of the 1st. These two observations would form the basis of my bias for both stocks.
Not sure what to say beyond that.
I was wondering why did you choose $62 as a level on GMCR instead of the upper/lower levels of the consolidation $62.25 and $61.85?
Going more on what Andrew said, I can definitely see the point where you could tell one could see more upside vs. greater downside. Starting at about 10:45, GMCR took no time at all to retrace most of the morning’s move lower. QCOM, however, consolidated in a very tight range near the lows. It almost reminds me of one of your “Spencer Special” plays.
What’s the “Spencer Special”?
QCOM clearly was in the freefall zone below 62. GMCR had a few intraday support lvl`s to break.
A long on GMCR at 62.00 seems a bit counter-trend without seeing the rest of the chart. 64.00 is a nice and safer spot for a long to me.
Below are a good number of blog posts to get a better idea of the play, but it’s relatively easy to understand. As Steve states in the last link, ” These are stocks that have had an Opening Drive and then have a tight horizontal consolidation before a continuation of their trend.”
http://www.smbtraining.com/blog/14324
http://www.smbtraining.com/blog/another-spencer-special-%E2%80%93-smb-radar-play-of-the-day
http://www.smbtraining.com/blog/smb-radar-play-of-the-day-gpn
http://www.smbtraining.com/blog/follow-up-on-microchip
http://www.smbtraining.com/blog/smb-radar-play-acom
Hope that helps,
Geoffrey
Once GMCR held 64 would have gone long; Once QCOM didn’t hold 61 – would have gone short. If your asking what I would do at the very moment in time shown above on each….I would wait. Both look like they’re weakening on the above given trades (volume going down & each look indecisive) and each looks as though they are ready to test given resistance (61 on QCOM) and/or support (65 on GMCR). Look forward to seeing what your analysis is.
Once GMCR held 64 would have gone long; Once QCOM didn’t hold 61 – would have gone short. If your asking what I would do at the very moment in time shown above on each….I would wait. Both look like they’re weakening on the above given trades (volume going down & each look indecisive) and each looks as though they are ready to test given resistance (61 on QCOM) and/or support (65 on GMCR). Look forward to seeing what your analysis is.