In this video, watch a former part-time retail trader, who blew up his trading account, but then rebounded to become a prop firm, present one of his favorite setups. A firm trader dissects in step-by-step detail a technical analysis trade that he labels an A+ trade.
View Video Transcriptin this video watch a former part-time
retail trader who blew up his trading
account
but then rebounded to become a prop firm
trader
present one of his favorite setups hi
i’m mike bellafiery co-founder of smb
capital where proprietary trading firm
located in midtown manhattan
and i’m also the author of trading
classic one good trade and the playbook
in this video
a firm trader dissects in step-by-step
detail
a technical analysis trade that he
labels an
a-plus trade let’s get to work on
sharing this recurring
technical analysis trade so you can add
it to your trading playbook
[Music]
god i appreciate you chatting with us
about
your comeback plan to actually
trading with us on the desk and so we
talked about
your thoughts as to at your journey as
to how you did that
and your advice to some of the
independent retail traders who have
blown up or
done some silly things and to keep at it
but to actually be able to go from hey i
want to make a comeback after i blew up
to
being able to trade consistently
profitable you actually need the
strategies to go along with that as well
and so let’s get a look at a recent
trade that you made
which i suppose you have incorporated
into your playbook
and see how you’re doing on the strategy
side as you work to your goal of
you know i’ve i’ve come from come back
to
a seat on the desk to your next goal
which is i want to be trading full-time
and give this my full attention and
see how good i can be from there so
let’s check out your strategies
okay so this is a simple strategy that i
uh
implement it’s just a daily resistance
breakout
using multiple time frames so
you’re looking at a daily chart and then
looking entered a price action to
confirm
uh the breakout and this is gonna be in
snap
okay so for this trade strategy what
you’re looking for
is key resistance levels on a daily
chart
and ideally this level has been tested
multiple times so it’s a clean
resistance level
ideally the stock is above the rising 20
day simple moving average
sometimes they respect the 10-day moving
average
but the 20-day moving average a little
more conservative
and you’re also looking for volatility
contraction on the daily chart where the
range is getting tight and the volume is
starting to dry up
and you’re looking for sectors that have
relative strength
and then that stock within the sectors
is showing higher relative strength than
the other ones
so for entry into this trade you’re
looking you’re looking for
uh the daily chart and then intraday
you’re looking for
one of these three setups either an
opening range breakout
or an intraday pullback a reclaim of
v-wap and consolidation
and which a lot of people i think the
firm calls this a big dog consolidation
or a wedge pattern and then so you’re
looking for that
break out of that wedge
and so you can put on a full position
just prior to the breakout or you can
scale into this
and your stop should be the lower the
consolidation range
or the low of the day depending on the
appropriate level
and some possible reasons to sell would
be the breakout fails
the breakout initially works but then it
fails to hold above that level
uh the stock gets extended from v-wop
intraday
or you see a big blow-off type pattern
where you get a big blow-off volume
and a big you know one or five-minute
candle to the upside
now scott do you need a news catalyst
for
a trade like this that’s the ideal
situation
that you’d have some type of catalyst
that’s driving it higher either
an earnings win or some type of news
event
in this particular case there wasn’t any
news it was just the sector was strong
on this day
so just looking at the market the spy
was
nothing unusual it had pulled back a few
days prior
and it was just rebounding off of that
looks like a normal pullback
and on this particular day twitter
facebook and snap
were all pretty strong
so there wasn’t any news for snap on
this day
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looking at the overall intraday
fundamentals
snap’s a larger cap stock average true
range of 3.82
average volume is 20 million it really
didn’t have
elevated our ball on this day only 26
million for the day
but it did have arvol on the five minute
chart when it actually broke out
short float four percent and ten percent
institutional ownership
1.17 billion float
so once again ideally you would have
elevated orval on the breakout but in
this particular case it was
it was a breakout through daily
resistance with
basically you know no real
arbol on the daily chart what would your
ideal arvold b
for this setup i think three is a good
oval to have and because the arbol is
1.25
are you factoring that in when you’re
thinking about your risk budget
how much you’re to risk on the trade in
this case
i didn’t but i think that’s
something important to take into
consideration
going forward
because a lot of these breakouts
can fail if they don’t have the volume
behind them okay so
looking at the daily chart this is where
it’s just a really clean level there at
just over 65 we had tested it
like six times and on the right side
of the chart you can see the range had
gotten pretty tight over the past
month between 60 and 65. so i ask
traders to evaluate technical levels
from a scale of one to ten
just by themselves when you look at that
resistance level on a scale of one to
ten
how important do you think it would be
yeah i mean just looking at it it’s kind
of obvious it’s a very important level
it’s it’s just very it just stands out
it’s
there’s no real question that 65 20
i think is what it you know that area is
just a very important level yeah i mean
you’ve tested this
six times we’ve we’ve done this over the
course of
four months i don’t know if this is a 10
out of 10 resistance area or
9 out of 10 resistance area but it’s at
least that
you don’t see a chart like this every
day
this is a super important technical
level
that has got to get your attention i
mean if it were to get above that level
that trade because that resistance level
is so prominent that’s that’s something
i want an alert for
that’s something i’m watching if it gets
above that
area just just as a technical trade
without there being a news catalyst
just as a tech that’s a that is a that
is a technical trade in of itself and a
lot of times we talk about combining a
news catalyst
with a technical catalyst but
a technical catalyst can be a big enough
catalyst
in of itself and certainly above that
resistance area
is a is a really good trade to be
alerted to
and to see if you can build into
profitable trades
okay so now we’ll look at the intraday
price action on the day of the breakout
so
it had a big opening drive where it ran
up and
tested the breakout level and
so a lot of times momentum names
when they have these big opening drives
when they pull back into view op
you can you can actually it’s a pretty
good trade to put on some risk
at vwop if it’s going to continue higher
and so in this case i i didn’t catch the
initial move but as it pulled back into
vwop
i put a starter position on and it did
crack below v-wap initially
and this is where i think it’s important
as far as position sizing to
put in put in a smaller size on your
initial bet that way if it does go
against you you you can give it a little
bit of wiggle room if you’re if your
idea is still
solid because if you put on too much
risk initially the intraday fluctuations
can
can get you stopped out so in this case
uh this was about a fifth of my
full position so i held it when it
cracked below
and then as it pulled under v-wop it put
in a double bottom
right around 64 and then reclaimed v-wop
which was a very bullish sign
and the whole time i’m still thinking
about that 65 level
and so as it reclaim v-wap and kind of
consolidated sideways i started
putting on more risk and
as it got tighter and tighter intraday
it ramped back up and tested again
the level a couple more times
before it finally broke and i had full
position size on
you know in the consolidation range
there between
uh 12 and one o’clock and then when it
broke out around
13 30 you can see that even though the
daily volume wasn’t
elevated that the short-term five-minute
candle volume
it was elevated on that breakout so that
was
the confirmation that you needed that it
was going to go
and so at this point i’m just holding my
position
and as it got extended this was more of
a feel
exit i just happened to exit at the
high of the day but
ideally you you scale out and and leave
some on for a bigger move but in this
case i
exited all at 67 and this trade could
also be a good catalyst for
or a candidate for a swing trade and it
did ultimately run over the next few
days up to 70 dollars a share
so this is just showing the executions
through trader view where i put my first
position on and then where i added
and my exits
so yeah that’s all this one is where do
you start buying
uh right around just over 65 maybe 65 60
or 60 i’m sorry 64.60 and then you so
you you buy there
i guess your stop is below 64. correct
yeah how do you feel about the fact that
it’s actually not above
that longer term resistance area of 65
yeah since it hasn’t broken out yet
there’s there’s a chance it could
it could fail and because of the
intraday volume is really
or i’m sorry the daily our ball is
really not there but
as far as like the intraday pattern is
concerned that
the pullback to v reclaim and
consolidate in a tight range
is a very strong pattern and
that right there gave me more
confirmation that it was or more
confidence that it was going to go
that’s kind of how i approached it and
were you watching
some of the other social media names at
the same time yeah i did notice
twitter was was strong this day
but there was uh i didn’t really watch
facebook but i did notice that twitter
was
was also strong well what’s more
important the fact that it’s not above a
longer term
very significant resistance area or that
it’s holding intraday view up
yeah i guess it depends on whether
you’re looking at it from a bigger
picture perspective or not but from
i guess a day trade perspective it’s
important to be above viwa
i think there’s two really good trades
here
i think there’s a really good momentum
trade
when we we we actually
get above that 65-40-ish area
you know it it’s it’s not able to get
above the intraday high
and then it finally does and it’s now
above 65 it’s held above 65.
there’s the shorts are gonna have to
cover the longs are going to be
fearful to miss out
the momentum is to the upside
you can make a a really strong career
playing the momentum when we actually
get above those prices
playing the momentum with size and
becoming a really good
short-term momentum trader that’s a very
good trade
and then the other thing that you can do
is
when it’s holding that 65 and holding
above that 65
to give that a run for a swing trade
right there
and i don’t think that’s an intraday
trade that is a
longer term trade what we’re seeing on
the desk with some of the guys
is they’re taking entry and they’re
turning them into intraday trades
multi-day trades trading them
uh distinctly trading them with with
different rules
the intraday is going to have intraday
trade’s gonna have some some different
rules than the swing trade
and the stops are gonna be potentially
different the entry can be very similar
but they actually morph into different
types of trades and particularly in this
market
we’re seeing guys have lots of success
holding things for multiple days
that are uptrending or breaking out
and and holding them so i i see
i see two trades and i don’t really want
to be
i don’t want to be in the in the game of
telling you how to trade but i also want
to point out that there’s
two trades that you can build a career
on that i’m seeing in this opportunity
above that 65 resistance area super
important technical level not really
trading below there
giving this a run for a multi-day swing
trade
because it’s because of price
and then a momentum trade
because it’s coiled and consolidated
and there’s winners and losers above
that area
i think those are two those are two
pretty good trades when you’re trading i
think you want to be thinking about the
big picture
and to me when that’s not above 65
and it doesn’t have a news catalyst
and it doesn’t have elevated arbol
from that opening drive that’s that’s
you know you said
correctly above three i think
that’s i think you got to be thinking
about that
so thoughts on that
yeah that’s that’s great input mike
thanks for that
um yeah just just kind of reiterate i
mean i can’t really
swing trade in the account yet but this
would have been one that
would have i would have swung swung this
one
had i’ve been able to yeah and guys will
swing that with stock and they’ll swing
that with options
and give that a run and i mean
this is obviously a lot higher although
it had earnings there was an intervening
factor it had earnings
so but great level to be looking at that
65 level is a super important level
i do think you can build playbooks that
are holding below
important technical support areas if
they’re really clean and they’re really
holding up and i guess that’s what
you’re saying
you’re saying this is really holding up
well it’s really clean it’s really
holding
the support areas that are and the
technical indicators that are important
to me
and because of that it’s foreshadowing
that it’s going to get above this 65 and
i’m going to give it a run
i think that’s fine i i would prefer if
there was arvel that
was on our side i’d prefer if there was
a news catalyst that was on our side
but if if you can make this into a trade
great so basically overall you know you
want to see
the intraday price action and the daily
price action confirm
as we were talking about in our previous
discussion is uh kind of oversizing
and just putting on too much risk on
trades that don’t really warrant it
so it’s it’s one of those things that
i’m continuously
working on um because i just have a
natural tendency to want to do that
so my next for my goals for this month
is to only go big on the best trades
um the next one is focus on
a few key setups and trades that that
you’re going to focus on
and it’s easy to get distracted via
social media or
other people’s ideas etc where you kind
of lose focus on
your key trade ideas for the day so kind
of narrow it down so that
you don’t get you know spread all over
the place
and then waiting for price action to
confirm thesis
so if you see something on the daily
chart setting up you know wait for the
intraday
price action to confirm that it’s it’s
something that
you know i’ve had some really good days
but i’ve also had some days where i’m
i’m entering anticipating versus waiting
for
the price action and snap was one that
confirmed and it was a good trade
and so i want to continue doing more of
these type of trades
in less anticipatory trades hey go ahead
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