In this video, learn how to spot the stocks you should stop trading. Two firm traders identify a stock they should stop trading in real-time. Most importantly, they explain why they should have stopped trading this stock.
View Video Transcriptin this video learn how to spot the
stocks you should
stop trading hi i’m mike bella fury
co-founder of sme capital and we’re a
proprietary trading firm located in
midtown manhattan
and i’m also the author of the trading
classic one good trade and the playbook
in this video two firm traders identify
a stock
they should stop trading in real time
most importantly they explain why they
should have stopped trading the stock
let’s get to work on sharing these
important trading lessons
so you stop needlessly losing money
so we’re gonna be watching a tape from
logitech
uh from yesterday their day after
earnings uh
in just a quick synopsis of the earnings
uh huge beat blowout earnings
crushing eps beating on revenue
which was helped by the pandemic and
going into the day it was gapping up
to an all-time high and gapping up about
seven atr uh and just to mention before
we start uh just showing this tape
it’s a trade where i made some mistakes
and it wasn’t a good trade but trying to
really focus
on how i could notice when something’s
not trading clean
and just how to move forward to avoid
getting chopped up
in stocks after earning similar to
logitech
you want to edit them yeah i’ll add in
another major mover for the stock was
jp morgan one of the major banks had a
price target upgrade as well from 70 to
100
due to the major revenue of over a
billion dollars for the first time
um and then also to build off what tim
said yeah this
reading the tape session won’t as won’t
be a really well executed
trade rather it’ll be a stock that was
tough to trade in a stock that a couple
of us
lost money in and we kind of want to
point out the variables of maybe
why it was tough stock to trade
what should have been some warning signs
that maybe this wasn’t
where the best opportunity was after
seeing how it reacted off the open
and just really looking at the variables
that made this a difficult trader so we
can
identify that in the future to find
better opportunities to trade since
there’s going to be a lot of things
moving right now especially going into
earnings season
multiple uh major name companies
reporting earnings a day now
with major gaps so really keeping our
eyes for
better opportunity and noticing when
we’re not seeing it in real time is just
as important as noticing the best trades
so matt you’re looking to
spot stocks that you should not trade
that you should move around
that you should move away from so you
don’t lose as much money
exactly some a stock that might not end
up having the move you were looking
for and then kind of when they get stuck
back in a range or something like that
just kind of moving away because if it’s
not doing anything you planned for
you don’t want to force your idea on the
stock or for things you weren’t prepared
for but rather
look for other opportunities that might
be setting up a lot cleaner something
trending outside of a range
is often very attractive as a day
trading vehicle
so when we see something really stuck in
a range
off the open waiting for that to break
out either way is often
another good principle and that’s
something to look at in this tape it
really
can’t break either way after looking
like it may multiple times
trapping people both long and short and
wicking many people out before the real
move was made
like a half hour into the day good and
as you guys are developing very useful
exercise
to create some of the patterns that
you just shouldn’t be trading they’re
just too hard they’re not worth your
attention they’re not worth your
intellect they’re not worth your capital
they’re not worth they’re not worth you
know the firm’s capital or
your account capital and they’re not
worth your emotional capital
not worth your intellectual capital
they’re not worth
your capital and they’re not worth your
emotional capital
and if you can start to spot you know so
lots of times people say well
i want to eliminate my bad trades okay
well what does that mean
i want to eliminate the trades that
aren’t working for me okay so what does
that mean
i want to trade more of the patterns
that work for me
okay so what does that mean well it
means being able to spot in real time
stocks that aren’t moving well stocks
that aren’t moving well for you
stocks that aren’t going to move well so
you can go spend your time on something
that is you’re going to develop skills
that are
going to lead to making money
applied on the wrong stocks you’re not
so i i
i really like this exercise here all
right let’s get let’s get to it
all right so we’re gonna start it up uh
and we’re gonna see
this 94 level uh on the open and it’s
gonna be showing strength
uh just to mention extremely implied 185
our ball
and it was doing like 76 of his average
daily volume
first minute so here we go if you want
to learn three
real world setups that our traders use
including the simple setup that we teach
all of our new traders and the setup
that turned one of our traders into a
seven figure big money earner
check out the free webinar that we’re
currently running just go ahead and
click the link that should be appearing
right now at the top right hand corner
of your screen
that’s gonna open up this free
registration page in the new window
so don’t worry you’re not going to lose
this video you’re going to learn more
in a couple of hours from this trading
workshop than from years of online
education
so really what we’re going to show off
the open is how many prices this really
touches
on the chart you see some inflections at
94.
and then that like 95.50 area is another
major inflection area so we want to
watch how it acts around those prices
and if it really respects any of them
and what we’re going to notice in this
tape you can keep playing it is that
these levels
won’t be cleanly respected instead
they’ll kind of
leak through both ways and give a lot of
knee-jerk reactions making it really
tough to manage your risk
yeah so like you said right off the open
we’re up almost half an atr
stocks showing strength uh from that 94
level
exactly yeah it looks strong thinking
all right it should hold this 94 level
if it pulls back
and starts to consolidate which we start
to see here
and see it just quickly gives out
there’s just no hold at 94.
those those buyers are probably out now
and we’re getting back into this kind of
choppy range down to 9250
where there’s just a lot of volume being
done so to me not holding that 94
is a telltale sign that it is now weak
with that dropout so what i’m thinking
for a setup for me
is to short a possible retracement now
if we can get a move back to like 93 and
then risk that 94.
but we’ll see why that doesn’t work 93
like 10 is also the v wap area that’s
what that purple line is
so v wap is often used in this opening
like five
minutes as a level because sometimes the
levels haven’t fully developed yet and
people are looking for
things to trade off of to monitor their
risk better
so we’re thinking again if this is
really weak it should bounce there
continue to the downside
looks like it’s making a new low here
you can see you even put your cursor
over it seeing that yep
drop so quickly give out
so it does
still not involved or anything here uh
but we’re gonna see
that it’s gonna fail to hold below this
92 level and we’re going to get a
retracement
exactly so yeah looking back on the
review
that first retracement could have been
good uh but unfortunately
i was watching which is not enough time
there’s not
there’s not enough time too steep not
enough time needed
to go sideways a little bit more to have
a safe entry
yeah maybe you could have scalped it but
that’s at most so then we’re hoping if
this is going to be weak and actually
trend after all these rejections it
should probably hold like
under 92 ish and you can see it just
kind of
pushed right back up through that level
and is now holding it i’ll just mention
my first trade and we’ll skip ahead matt
i think where you got involved
after but so we get this second
retracement here at this 92 level where
it just broke
down from uh and then i got short
um risking now 94.
and at first it looks like it’s working
decently it’s going to chop around this
92 level
yeah my trade in here was i thought
there could be a dip and rip set up when
we’re really slowing in these 9160s
and when it picked back up over 92 i
actually bought like 9210
right around this time kind of expecting
it to
hold this 92 level my stop is like 90
150
or like that wick low so if it makes a
new low i’m out
and we’re gonna see soon here it gets
back under 92
quickly wicks makes a new low and then
comes back so
it stopped me out for my trade there
when i was trying to
buy the bounce as it didn’t really hold
that 92 level which
initially looked like it was
yeah just for us to both have thesises
for
uh two different sides of the trade kind
of shows you it’s up in the air
definitely yeah with so many drastic
movements at both sides of the range
without really breaking out
it just shows this there’s a lot of
accumulation on both sides and
it’s really going to need some time to
develop a clean pattern or trend
otherwise it’s going to be easy to get
chopped up like we do here
especially if you’re hitting breakouts
or breakdowns
which are more likely to be able to
happen in like the first five
ten minutes of the day those are
probably the best times to be hitting
those momentum trades so
when those aren’t following through it’s
the easiest way to get
chopped up in opening drives
yeah definitely and the spread is one
thing to mention as well
it does get spready on this yeah right
here it gives out and that’s what stops
me out when i was
long kind of saw the 92 and not be able
to hold
makes it looks weird yeah i’m thinking
this looks weak
tim’s feeling good about the short just
took off a third as
it broke to a new low and it looks like
it’s working for me
and we’re going to then see the
retracement one thing about this is that
there’s not a lot of time that’s gone by
it’s pretty far away from b
could snap back the view out still be
pretty weak so your prices down here
are a bit precarious oh sorry
yeah i didn’t actually know that i was
gonna do that
it’s it’s it’s gonna pop all the way to
like high of the morning like 94
94 50.
so pretty tough one to be building into
anything short when not enough time has
been spent
and um things of that nature
when i’m watching a stock like that that
is what i would be thinking which is
not enough time has gone by it’s still
pretty far away from
from view op it’s still far away from
you know an inflection point it could
find
where buyers and sellers come together
it’s a little bit extended to the
downside
so you have risk that it can just pop
and find that equilibrium and then do
some buying and selling and then figure
out where it wants to go from there
and that that price can be pretty far
away from
from those lows of day yeah and i think
it’s also important to remember the news
on this was very positive
and kind of a fundamental shift so
people could have really been
accumulating so pushing a short on such
a high
gap up to all-time highs can definitely
be a tougher trade
yeah definitely uh so just kind of like
you mentioned mike we’re about to get
this pop
uh to view up where i was thinking of
adding to the short
uh and then it’ll quickly blow me um
and stop me out blow me away from the
trade because it’s gonna go
right through it
so yeah at this point it now looks like
we’ve broken out of the top of the range
broken out of the bottom of the range
and now
we’re right back kind of in the center
of it so it’s really easy to get caught
on either side of that with too much
conviction
if you’re not really letting the time
and volume
show you the better the bigger picture
and then i would just say one mistake i
made is at this 20 or
yeah 21 ema i didn’t think we were
getting to view up it looked like it was
getting held up there and i added short
just now to quickly take it off when it
breaks through 94.
everything was risked to 94 but uh just
a lack of patience
yeah now it looks like a classic dip and
rip set up it’s like okay
it pushed off the open yep then
then got accumulated couldn’t quite
break down
red to green big move holding v wap
and then this pullback is just really
steep for
what you’d expect if it was strong in
reversing but definitely thinking a
little bit
more on the long side here but you want
to see it really
hold over the 94 level which i believe
we kind of fail to do
giving you more kind of confusion to
which way this could really
trend yeah and i remember matt too we
were talking about like 92 50s
yeah and a little bit that seemed to get
some buyers uh supporting that
yeah i remember i i just brought up my
executions i bought it 92
42 in in this pullback it’s like right
in here
thinking okay if this is a dip and rip
like this is going to be the major
pullback the test under v
wap these are the prices i want to be in
um and then if you want to skip ahead
maybe like four or five minutes i think
it’s just gonna like consolidate for the
next couple minutes
and then try yeah yeah i got in on this
wedge
and then i think this is actually very
close to the dropout
the breakdown of this wedge but at this
point it’s
wedging right below view up it’s looking
like it could break
out above 94 above viwa
and watch and see if we can get above 93
above view up
and then have some volume volume come in
uh but that’s not what we’re going to
see
um you want to skip ahead a couple
minutes again so what’s going to happen
is we’re going to kind of pull back a
little deeper and we’re expecting
and it’s going to push to 94 again which
really should be a major breakout if
we’re testing that level again
holding higher and
yeah so you can see that dip there stops
out our initial long idea because it
just breaks down under
92 but then quickly re-bids i don’t
think okay should be the higher low
this should really break through 94. and
then i believe we get a
move through 94 and then just a quick
stuff back under the level
and more chop and so trying to buy this
breakout
is definitely gonna give you really bad
prices and quickly stop you out
look strong look strong
exactly now above view up we’re getting
some volume come in
oh good that’ll definitely make it work
then
yeah so this is going to be a big make
or break point
for this trade i mean it’s spent 10
minutes 15 minutes now off the open
trying to break either way
it’s look like it’s getting a tighter
consolidation
it’s holding under the level above 94.
so it should really go here it should
really break up towards 95
here in my opinion if that accumulation
was real people should be buying it
higher
really pushing it up especially for a
dip and rip setup
that five minutes should really continue
i think that buy in the wedge to the on
the long side is is an okay trade
i mean it’s i wouldn’t call it a great
trip but i think that’s an okay trade i
think that’s the first
trade i’ve actually seen that i might
take
it’s at the highs good earnings yeah
some time went by you know it traded
between 92 and 93.
it looks like it wants to try and go
higher i think that’s an okay trade
you know your stop is going to be your
stop’s going to be below 92
probably no that’s a little bit far uh
i’m sorry it’s straight in between
it’s not as clear on it’s trading
between 90 and
90. between like 91 and 94.
91’s the wicklow sorry i couldn’t see it
here on my screen
but um yeah i mean the real stop is
below those wicks there
if you can show is can you see the wedge
and then the reel now before that
after that sorry the one where we got
stuff
yeah so that red wick right there like
the bot like below there
it’s like the real stop which looks like
that’s 90
90 like 2 91 90.
i think that’s kind of yeah like 90
below 92 below 9150 is probably a real
stop
for for that momentum to the upside
that’s an okay trade i think i take that
trade you sort of buy it
around 92 around 92.50
maybe by a little bit more when the
wedge breaks
volume gets a little bit better i think
that’s an okay trade i think i’d be
tight with that but and that’s not going
to work right
that trade’s not is that’s what happened
to me i was a little too tight on it i
got stopped out at like 90 to
20 when i had a 92-40 entry just because
it pulled back a bit more than we were
expecting stopping us out
and then yeah we’re gonna push to the
upside quick push over 94
and then you would expect it to pull
back and hold there and it just flushes
back to v-wop
and gets back down to this 92 area where
it
consolidates and chops around for like
the next 20 minutes of the morning
so that’ll go to show you can skip ahead
now tim if you want to show like what
the pattern will look like
yeah so we could see this flush just
complete rejection of 94.
uh that stopped me out this brings us
right back into the range
exactly and i have a rule that
after trading a stock and it tries to
make opening drives and if it breaks out
of the range
and then comes back in quickly or an
uncharacteristically way
then i want to stay away from it for at
least the next 20 minutes
great rule breaks out of the range it
shouldn’t come
back to the middle of the range and if
it does trade decision
great rule because it’s going to be
really strong it should just go
pop pull in there should be aggressive
buyers
protecting that former resistance area
resistance should become support
it’s going to be really really strong
they should hold it above the breakout
area
totally agree with you yeah
and in a similar way i looked the way
uh we just consolidated here but i would
say like
if we’re thinking about what told us
that this wasn’t trading clean
i would say the first notice was this
retracement the red to green move
where i just couldn’t pick um a
direction
strong opening drive then completely
reversed and reversed that
and then the second thing was that flush
that rejection in 94.
i think that’s a good trade in the longs
i think that’s an okay i think that’s a
good trade on the long side
that wedge pattern playing for the
upside in a strong market
strong stock i think that’s that’s a
good trade it didn’t work but that’s a
good trade
and then i think you got to move on or
or or say to yourself
i i have to see a really big level
develop
you know maybe this you know 92 area is
going to become a really big
level it develops and i’m only now going
to move to a plus trades so i got to see
this 92 become a really big level or
maybe 94 will become a really huge level
and time’s gonna have to go by and it’s
gonna have to get
below or above those those areas for me
to be
interested in in a swing trade so i’m
i’m i’m moving to
it’s not working what i’m doing and this
is a little bit choppy
maybe it will work maybe
and maybe this is a good setup worth
considering if there’s just a
super technical level that gets set up
intraday
super clear big battle
92 or 94 something like that
i’m shifting my gears to i’m only in it
for those types of trades definitely and
that’s pretty much exactly what we see
in this for the next like
10 15 minutes 92 really develops as a
big level
before it can trend higher back to 94.
then it makes a move into 94
which is still level and then pulls back
and consolidates a while again
so yeah you can see we do then get a
breakout
that does develop i could just start it
like here
yeah we don’t i don’t think we need to
watch the breakout because it’s slow
but i would skip ahead to like another
10 minutes and show this breakout pulls
back much steeper than
you would expect for breaking out of the
range again
comes back into like under 94. i believe
yeah like here it’s like 93 30 so that’s
that would still look like a kind of
rejected breakout to me in a way if it’s
pulling back that steeply but on a
longer time frame could be accumulation
like on the five minute but
from a day trading perspective in the
morning these are just not the types of
setups we want to be involved in
and we kind of knew wasn’t trading
cleanly from our earlier trades and it’s
why we stayed away
from this uh eventual breakout of the
wedge pattern
good and just like you want to have a
playbook for trades that you want to
take that are your a plus setups in your
trading business
you can develop a playbook for the
trades you don’t want to take and you
you can
it’s perfectly fine to say if i start to
see these characteristics if i start to
see these variables in a particular
stock i’m going to stay away from
it it’s not worth my time and
be specific just as specific you as you
are
with your playbook trades i’m going to
be in a breakout trade if xyz123 happens
you can say to yourself i’m not going to
be trading a stock if abc123 happens
and it looks like you guys are saying
this is one of those
those stocks just it’s too choppy
exactly yeah i mean we get better when
we do more of what we do well and we do
better when we eliminate what we don’t
do well and this could go on the bucket
of
eliminating what we don’t do well but
super important
to be able to say i say this to myself
all the time when i’m trading
top traders say this all the time while
they’re trading
it’s just not acting the way that i want
it to and they move on
that makes sense that’s definitely
something to think about moving forward
now i mean the other thing you do want
to
uh think about is i was talking with
swang today
about jks and
spencer was was was chirping out right
on the open
you guys are remote i’m in the office
today
with a couple of the guys spencer’s in
the office today and spencer was
chirping out
today about how jk has heard in the open
showed weakness
and then it showed that opening drive
weakness pretty deep red candle
pretty good volume that came in and then
it
it so it went to the bottom of the range
and then it went all the way to the top
of the range
but then and then it made up a new high
and then failed
and then made a new low again so uh when
it made that new low again
it really started to look like
uh risk was off on this particular trade
and there’s a bunch of guys that have
been trading this in different ways
buying some puts is one of the ways that
swang was attacking this and during one
particular moment of the trade
it went up a little bit more than swang
had hoped
but i was chatting with him on chat i’m
like no this is good actually like
this stock has been strong we want
actually a particular time when people
get excited and think they’re going to
start buying this up again
we want there to be a little bit more of
an overextension and if if we can
see that over extension and then it turn
over
you know we can really add to our
position and hit it hard right here
um and so i want to make sure
that we make the distinction i say that
because i want to make sure and so
i i happen to say to swang i’m looking
to short it
right here when it looked pretty hot
into a not move it was still
below the ewop and and his his thought
process was he just didn’t like it it
was
it was getting too too strong for for
his taste
um but i said look this is this is good
we want this let’s
let’s see the roll over here and we had
that conversation and
it ended up actually rolling over where
i where i thought it was too hot
um and and and he was able to stay in
the trade
and and see that with me as well so i
you do have to make the distinction
between
hey this is a trade this is a stock i
don’t want to be in
versus this is a huge opportunity
and a bigger longer term trade
you know jks can pull in 30 and still be
a terribly strong stock
and i can use these over extensions to
add to a position
like in jks when it got too hot to add
to a winning trade
and so you you you want to make that
distinction with your trading sometimes
the craziness can be really good for us
if we learn to harness that well but
it’s got to be in the right it’s got to
be in the direction of the trade
this this this wasn’t an example so so
good i’ll uh read the questions we have
in the chat
uh mike can you talk about what is the
meaning behind of the spread getting
tight or wide on the tape and what does
it indicate
yeah i think you want the spread to get
tighter that indicates that this is the
moment
where it should break so when the spread
is wider and then it narrows
the move following that narrowing
it gives i add more significance to that
because the buyers and sellers are
coming together
and there’s going to be winners and
losers and i want to follow the winners
good to recognize that that that isn’t a
that is a very savvy
observation you’re making about a
particular stock and a very savvy
observation you’re making about the tape
that can give you really good
information then we had one more
kind of similar question from kyle do
you think that
setting some type of rule in regards to
the spread of a stock may be beneficial
example avoiding names with 30 cent
spread
um there’s a chance people might have
edged in these spreader names especially
when they tighten up
so what do you think about that look i
think it depends on your experience
level
it’s harder to try to spread spread your
stat when you’re starting i think you
want to start with stocks that have
tighter
spreads at the beginning of your career
i think you want to start with stocks
that have that are cheaper
in the beginning beginning of your
career as you gain more experience
you can trade more stocks that have a
little bit
more of a spread and that have a higher
price
um so think about that
easier to trade stocks that have tighter
spreads and are cheaper
and then i think of it as you know you
want to think about your trading career
as in steps you can’t climb the mountain
other than one step at a time
at the bottom of the base are the stocks
with
tighter spreads and cheaper prices
and as you succeed with that stage of
the mountain
then you trade stocks that are a little
bit more expensive and open yourself up
for the
possibility to trade stocks with a
little bit more of a spread and then
after you
conquer that you take the next step up
the mountain and i’ll just mention
in my experience as someone who’s new on
their
trading um journey that i’ve noticed it
is
harder or feels harder when you’re
starting out by the way swang’s chatting
me up about how he’s covering into this
jks
i don’t know where it can you guys see
that where’s jks right it’s not 74
now oh geez all right we are we should
wrap this up let me go
do my thing with that i need to go cover
all right a little bit at least all
right thanks guys hey go ahead and click
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