In this video, learn how to use technical analysis signals that can lead to large stock trading gains. Two junior firm traders break down in step by-step detail their trading in an electric vehicle stock using key technical analysis catalysts. Let’s get to work on sharing these important trading lessons so you can grow your trading account.
View Video Transcriptin this video learn how to use technical
analysis signals
that can lead to large stock trading
gains
hi i’m mike bellafiore co-founder of smb
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 click our subscribe
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in the trading community in this video
two junior firm traders break down in
step-by-step detail
their trading and electric vehicle stock
using key
technical analysis catalysts let’s get
to work on sharing these important
trading lessons
so you can grow your trading account so
we’re going to be going over a
opening drive playbook from a couple
weeks ago and
neo incorporated when tesla was
really running and this was kind of a
sympathy to that so
sam will get us kicked off with the the
strategy
yeah so this is the uh kind of the ideal
criteria for a
bullish opening drive like most uh
trades we want to see that the stocks in
play so
especially for an opening drive we want
to see arvol
greater than two at a minimum
and then some of the best candidates
that i’ve seen for uh
opening drive plays is when it gaps
above a uh
strong level so ideally kind of like a
long term level
a previous high in this case for neo it
was
a gap above uh yesterday’s high
and it had a 6.5 gap which is pretty
or very strong i would say and then also
i like to see some strong pre-market
levels to risk off of
and then it’s uh really nice when you
compare
these uh pre-market levels with kind of
a psychological level
so in this case it was 14 for neo
so that’s kind of your line in the sand
and then
yeah like i said a breakout above
pre-market high and then
a strong hold above that level with
volume
and then some other things you can look
at is the uh
some like similar basket names so for
this stock it was uh within like the
eevee
all the electric so sam yeah
why is it important for you for it to be
above
and after hours higher pre-market high
so that’s kind of uh the point where
it shows where sellers i would say
are either out of the money or sellers
are going to give up
so if you if it can clear the pre-market
height you can clear the previous highs
sellers are kind of underwater and then
it’s a good
really good chance that they’re going to
start puking out their shares and then
we’re going to see
a pretty strong reaction at that level
yeah very important principle that you
bring up here which is we want to find
things
technically that are above resistance
levels
outside of the range we want things
outside of the range technically that’s
better for us
so we either want things outside the
range to downside if we want to short
or outside the range to the upside if we
want to get long
and so we also want to obviously look at
our daily charts
we want to take a look at our medium
term charts but
for a short term technical
indicator when we have something that’s
outside of its short-term range
that’s very positive because there
aren’t as many people that are getting
away
if that is the case there’s going to be
more people
who see that the stock is more likely to
move in a certain direction so excellent
to point out that particular variable
for something you want to look at i’d uh
also like to add another
prime example of finding an opening
drive trade above those levels
and just something gapping to all-time
highs this can lead to some of the best
opening drive trades
because off the open there’s not always
designated
uh risk levels for people to trade off
of so it can lead to some really
outsized moves while the price levels
are still developing on the tape
so all-time high gappers are one of the
best examples of
just finding something holding 100
mountain again an example of something
outside its range right this is
something that doesn’t have any
overhead resistance people looking at
the chart
are going to want to buy people who are
short are going to want to cover people
are looking are saying this is bullish
it’s not something that’s debatable it’s
outside the range we’re going to need to
find a new ceiling we’re going to need
to find new resistance
if that is the case so again
good to be looking good to be looking
for those scenarios
and then yeah so lastly just have uh
some of the other like ev names just
pulled up to make sure they’re
kind of following your move so if you’re
looking for an opening drive you ideally
want to see tesla open stronger
because that’s kind of the biggest
market name within the
ev field and then lastly
speed i would say probably most
importantly
so just just like the nature of this
trade for an opening drive you want this
to be really fast
you want to see lack of selling pressure
on the open
otherwise your overall thesis is wrong
if
let’s say it has a strong open
gets above pre-market high but then
instantly fails
that’s a different setup i look for it’s
like a failed break out of the
pre-market high
so for this you want it to be really
fast you want to see strength
and then you want to see continued
buying once it passes the pre-market
high
or let’s say a previous high or
yesterday’s high
and then when i’m looking for entries on
this setup
like like i was saying speed and then
initial strength on the open
and then a really good uh opportunity to
get long is if there’s a low volume
pullback to that pre-market high level
and then you see bids start to stack
there might be a little fight on the
tape
but a bid stack and then you see the
offers start to give out that’s a great
place to add
your tier one entry and then
tier two could be a uh hey sam when you
say
when you say you want to see bid stack
what does that mean
yeah so i want to see all the different
kind of uh markets like arca
nyc all of those i want to see
around uh at least like 10 or so
size with like multiple uh market
centers stacking up
and then also i want to see a little bit
of a fight with the offers i want to see
the offers stack
but then start to see the offers
decrementing and then ultimately
lifting for a continued move
and then during that it’s kind of uh
you’re looking for a really light volume
on that pullback so it’s not
true selling pressure it’s more just
profit taking
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years of online education yeah so tier 2
would be the break above uh
pre-market high for confirmation
and then your risk on this is that held
bid that you’re watching
in this case there’s a held bid at 14 on
neo
so with 14 drops that’s your first sign
to
hit out and then also a a failure
for the uh a hold above the pre-market
high
so this is spy intraday
so like i was saying with the ev
vehicles that you want to see
strong strong strength on the open you
also want to just see that in the
overall
market to support your idea so you can
see
uh i don’t have yesterday’s chart on
here but
there’s a big imbalance and it got
hammered into the clothes
but then right in the after hours it
started to hold up and consolidating
and then in the pre-market you can see
that it was pretty strong
was opening higher and then on the open
it had a little flush
and then just super strong blue pass
pre-market high
cleared yesterday swing high and just
didn’t really look back
so that’s another good uh check in your
favor when you’re
taking an opening drive play that you
see the markets following along with
your
with the stock that you’re trading and
so this is vixx this is another check in
your favor
you can see uh when spy was selling off
to the close the previous day
volatility spiked but then after hours
in pre-market it started to dry up
and then on the open you just see an
instant flush
of the vix and then you see it fading
throughout the day into the afternoon
so that’s a pretty good sign that if
you’re long
you can uh it’s a good trade to hold for
the meanwhile look we’ve talked about
this which is i like that you guys
are recording what volatility is
for your playbooks because that’s going
to be that’s going to matter
so with volatilities 15 that matters
relative to if it’s 30.
and and i appreciate you pointing that
out i do just want to make the point i’m
sure you know this
but maybe some other people don’t which
is that isn’t going to be as significant
when we’re taking a look at
neo neo is going to move because
the ev space is pretty hot whether the
overall market is volatile or not the ev
space is hot
and it will it’ll move
pretty good having said that though
maybe it’ll move a little bit more
if volatility is a little bit higher but
i do think comparatively
you know for instance if we were trading
amd if this was
a discussion about an amd breakout like
we actually had recently
volatility would be more significant
if this was a conversation about how spy
broke out
recently volatility would be
more significant so good to be pointing
that out
and then good to be comparing it
relative to the trade we’re making
yeah perfect without yeah with neo not
really being a market name
i don’t put too much emphasis but it’s
just always nice to see that if you’re
if you’re long it’s
it’s just great to see volatility fading
throughout the day just adds a little
more
yeah confirmation safety to the trade
yeah and then this is just kind of a
quick comparison
so i usually have if i’m trading any of
these ev names i’ll just have tesla
pulled up
so for the opening drive play you can
see
pretty somewhat similar patterns we saw
neo had a really strong pre-market off
of some news
and then we see the uh the really thing
like the really key thing i want to
point out here is you can see
in pre-market it gapped above
yesterday’s high
and then that also correlated with the
pre-market low so you can see buyers
stepped in
and we’re protecting that so everyone
who was short yesterday is underwater
and as long as uh that yesterday’s high
and that pre-market low is held
i have a pretty strong uh bias coming
into the open
i think it’s an underrated best practice
which you just did right there which is
trading neo the ev space is hot
tesla’s the the lead dog in this
particular space
and i want to know as i’m trading
neo what tesla’s doing i wanna i wanna
know
almost you know minute by minute
depending on the trade that you’re
making
tick by tick minute by minute five
minutes by five minutes
what tesla’s doing when i’m trading neo
and i’m going to use that as in for me
and i’m going to watch to see
how neo is reacting when tesla is
going up or down while tesla is strong
or weak while tesla’s above you up or
below you
up and i’m going to be comparing how the
two trade
with each other or or not when i’m in
this particular trade and i
reap what i what i really like what you
did is you literally have them next to
each other
you have them next to each other on your
screen so it’s easy to see
how one is trading in relation to the
other
so you can see by this graph it gave you
some really good indications on
uh the entry and the exits so you can
see on the open uh
neo is very strong as well as tesla they
both uh
gapped and opened above their uh
yesterday’s swing high
they both cleared the pre-market high so
those are some pretty good indications
good confirmation but then for the exits
this was really interesting so you can
see it
this is right around kind of 940 ish you
can see
neo is making a lower high
if you look at volume down there it kind
of had a blow off top on the volume and
then volume was fading
on that up move and then this was also
when tesla was making low
day so when you see neo making a lower
high
on very low volume in comparison to the
open
and then you see tesla has already
broken down and is making low of day
that should be a great indication to
either get flat or
cut 75 or so of your position
if you want you can hold 25 percent and
just
risk the uh that swing low at 1480
but i mean at that point you should
really be considering getting flat when
the other evs are making fresh lows and
prices failing to uh making a higher
high
and then the reason why neo was in play
was because in july 2nd it
reported earnings and deliveries grew
190 percent
year over year in quarter two to uh 10
331 vehicles
exceeding the quarterly guidance and
after releasing their
earnings they were up 6.2 percent and
they’ve been continuing to grind up
and just as sam said this is kind of a
market sympathy play as
ev names have been in play and a lot of
tension with tesla has been beating
earnings and making all-time highs
giving people more reason
and conviction to get involved at neo
and
on the next side you’ll see that there’s
much more contribution from
traders on robin hood platform and
during this day there’s elevated arvol
and just again
ownership so the pinkish purple chart
represents neo’s stock price
and the green chart represents the
number of holdings off of robin hood
and you can see that in june
on romney people started accumulating
neo and started holding it longer and
longer and buying him
and that was just when i was breaking
out the injury fundamentals the arv on
the day was 4.8
uh that was wrong it was 450k over 450
000 and
atr was one point zero eight dollars
short flow was fifteen percent and
institutional ownership was thirty seven
percent
uh for the long term chart you’ll see
that before june
neo was range bound below five dollars
and it has just been accumulating and
anyone who’s something to note
anyone who’s still long that got long
before five dollars breakout is deep in
the money so this is the
pre-market technicals so we have uh
our levels from the previous day where
we saw it trading in this range
like we said gapping up over that level
the next day and holding in this new
range from like 14
20-ish to 13.80 so watching out holds in
this range pre-market
is uh interesting especially when we can
see we’re holding towards the top of
this range off the open
most likely indicating a little bit more
strength as you can see we tested lower
in the range
and then had a breakout but even when we
pulled back we still held higher this
time
so definitely an indication of maybe
more buying off the open
interesting how that 1380 level holds
really nicely in the pre-market
it is yeah and that was something i
noticed from just actually watching the
tape in the pre-market because you could
just see
came back to that level to the price
exactly and then it would just
it would slow there there’d be some
buying always like a little bounce each
time
so yeah it was definitely a really
interesting level to use as like
a risk for a long as well knowing
there’s lots of buyers interested there
even after such a large gap up overnight
so we’ll go through the reading the tape
in like three major segments of the
trade
so the first like two minutes here will
be the market open
so we’ll see that it’s holding at the
top of the range
at 14 15. i’m going to go back a sec
because i want to highlight these bids
at 14
15. so this is this 1415 level is going
to be really significant for trading off
of
and we see this level from pre-market
trading
i have these ones with over a hundred
size on the bid highlighted black and
yellow
so you can see if just a lot of bids
really start to stack and we see them
here
at 1415 and then i’m gonna watch
if those decrement or if we hold above
and we do hold above
and we step up so i’m thinking off the
open maybe this 1415 could be a risk
level
we do get below it but if we can re-bid
right back up over
then there’s still potential that
there’s buyers and this is a good level
so the market just opened here so that’s
why the tape is picking up some speed
so we’re under this 1415 but we’re not
breaking down so i’m thinking if we get
back over it
and i get long 14 16.
and so you can see the speed that we
pick up i’m gonna go back just like 10
seconds again because it’s so quick
so we’re going to get over this 1415
level that we saw all the buyers in the
pre-market
and we’re just going to move like 20
cents right here 14 16s
and then we get the 20s mid 20s
uh 30s into the top of this pre-market
range 35s good place take off risk new
high
so you can see just that one price level
where we knew they were buyers and they
might come back in
we have a drastic pullback there but we
still
hold over this 1415
when we pull back after making a new
high it’s a drastic pullback because
and you have to expect that in opening
drives on such volatile names and to
take profits quickly
and be scaling out to cover your risk as
this needs to work instantly in your
favor
so there you we you scaled out on the
way up and then you watch this pull back
to 14 15
see if it can hold we never actually
even get back down to 14 15
the 20s start holding this time showing
some even more strength to me as we
broke over the highs probably stopped
out people
and now we see a deep pullback kind of
under that level and it gets rebit again
and now we’re looks like we’re breaking
out to the upside
as we couldn’t really fail to break down
we’re holding over these pre-market
levels now
and then we can see major breakout
and these are all-time highs for it so
1415
usually is a good psychological level
that people are going to trade off of
so then we can skip ahead a bit to
what i would call so that part was like
the shallow pullback
and then the upside breakout so pullback
1415.
now this is going to be the first
pullback after the opening drive
breakout
and often a place you can look to add or
or just re-evaluate your position
so we come back to test this try and
test this 1415 psychological level can’t
quite make it but we’ve had a big move
up so
definitely used a good amount of energy
in the stock so gonna watch how this
consolidation pullback is
and it’s a pretty shallow pullback holds
over the 1420s
does not have a lot of volume on the
pullback this is what you really want to
see
on an opening drive long pullback you
want to see the consolidation of low
volume
so that indicates maybe there’s less
selling pressure there and maybe just
more accumulation
so you can see we get the shallow pull
back to the 20s and if you were to
ensure off that 1420 level you’re
already 20 cents
in the money and so you’re going to want
to
really look for a break through this
1415 here 50 here if it’s really strong
skip ahead a bit we get a little bit er
sorry there we go
you can see after that shallow pullback
just the wick down on low volume
and it just gets bought right back up
and another new high
see some large bids keep flashing on the
way up that offer at 1460 just got
really decremented
so maybe gonna watch these mid-1460s now
these offers down here if they
they can possibly get decremented
probably slip to the 1470s
so we can see those 1460s finally
starting to hold so this is a good place
to lighten up some potentially
but then we do get back over
and make that new high again so we’ve
made almost
we’ve made a little over half an atr
move now so
but there’s a lot of potential for
stocks like this to move well
well more than their atr in a single
move because
like you said there’s all-time highs
there’s market sympathy helping it
there’s a lot of people underwater now
this doesn’t have high institutional
ownership so
maybe just more potential for less uh
consistent trends and more volatile
movements that we can take advantage of
yeah and another uh really good sign
from when you saw that flush down to
1420 and then that move
back up to uh where it is now at the
1470s
you could see the size on the there’s
just massive size on the bid that was
stepping up
every cent and then whenever there’s big
size on the offer you could see
it was just getting taken out instantly
so that’s just another check in your
favor
when you see the the bids stepping up
continuously with
with the same size definitely especially
with them picking up
so quickly and the offers all still
getting decremented right away
so when it can move up it can keep
stepping up that many prices that
quickly that’s a really good indication
so speed of the tape and these opening
drives and speed of even just the times
and sales at times and
how much is really getting transacted is
good to note
you can see it’s still just pushing
since this 1420 point
um lightening up in this area
just as i know we’re coming into 15
could be a psychological level
huge offers at the 1490 there i think
that’s pretty significant
to know you’re going to get that push to
15 as we’re making these new levels
so i’m thinking if we eat through these
offers then you’re going to get a slip
up and you’re probably going to want to
cover some more i’m sorry not covered
sell some more of your log
as this will be another extension so
these 1490s
and they give out and then we go
another five cents
then yeah that’s just a matter of seeing
if it makes it 15 or not
and i believe we finally start to get a
pullback here
oh yeah we get a wick through 15
and then it kind of breaks back down
so here it is so there was a bunch of
offers that flashed to 15 and
her bids at 15 and gave out and
you can see there was actually some
volume on this selling candle as well
maybe giving a new potential change of
character
from the opening drive because after
these opening drive moves
there is often a deep pullback because
this is such an extended move
so many people got caught on the wrong
side unexpectedly
and you definitely since it works so
quickly in your favor you need to be
selling into strength rather than trying
to as much trade around a core
okay and then so now we get our first
pullback and we start to consolidate
and we see we get another kind of
breakout level
and then so the last part of this trade
is kind of just seeing how it develops
over the morning
and it’s nothing too significant we
could just kind of chop around
at this level was like i was saying we
had such an extended move
over an atr up we finally saw a change
in character with a large selling volume
candle the largest volume candle
actually since the open
and then i know now people have more
levels to risk off of buyers will be
stepping in as 14.80 and shorts can
start risking off
these 1520s and i know this can become
an area of contention for the stock now
and i’m going to be more hands off and
just watch how the range develops
and you can use these levels that you’ve
figured out
throughout the day and as you come back
to 1420 you know there’s a lot of buyers
there
we see these 1480s and you continue to
build more ideas maybe on a
longer term trend um
so yeah that’s pretty much it for neo i
believe it just fades on the day from
there
we’ll have the the chart so that’s kind
of the three parts of the trade you get
the market open near highs break out
after the breakout it pulls back shallow
pull back and then the real upside
breakout
and then we finally get our
consolidation at the top of the range
another push and then that real change
in character indicating
the trade may be over so on the trade
chart for that day
this is how the executions looked you
would break by the breakout over this
1420
yeah and then you can also enter on the
pullback
with shallow volume in here
and you just really want to scale out
into that strength
so this trade management’s built off how
i actually executed it so you can see
like from trader view
how the executions were you had that
move over 1420
pull back on light volume consolidation
you can get long there
risking just like a couple cents under
1420 it should work
pretty well in your favor and then you
get a nice
upwards move let’s jump in here so that
pullback
after it has that opening drive
on elevated volume and is has cleared
the levels that you denote that pull
into that 1420 that that’s really
that’s really a trade that i would
encourage you to
think some more about and
taking on some more risk for that
particular trade particularly if
you can see it start to turn back up
because then you can you can really put
on a lot more risk
you can turn that definitely into
an opening drive continuation but you
can also
start to think about that with this
trade or with some others is as more of
a swing trade
or more is more of a
not a scalp not necessarily a trait to
hold
but something you don’t need to do as as
much with
something where you can wait to actually
see the exit
maybe you decide that’s 1520
is is is starting to show some
resistance
maybe develop some other exits but but
you’re really in the driver’s seat there
you really can find a spot where you can
risk
a lot more than some of the other trades
you mentioned that really can become a
home run trade from that spot right
there
definitely yeah gaining all that
information off the open
can all lead to a major trade if you can
just react when you notice that major
level
is held after such a strong open and
like you said then
if it’ll start working your favor so
quickly you can really add in more risk
and this is definitely a trade i am
working on and
kind of made a similar short trade today
but short and overstock
had this really strong pre-market level
it opened just holding below it and it
just kind of got
hammered so and then watching retests to
that level so this is definitely a trade
i’m gonna keep
looking into recording tapes and yeah i
really think this can be a powerful
trade
especially if we keep having a market
like we do with these low floats today
and yesterday they often have some of
the most potential for these
these major breakouts with shorts
underwater and
things of that nature and then i think
the
main thing to improve would kind of be
what bella was talking about in terms of
really seeing the exit
i was scaling out all the way on the way
up but i really
should have had some shares on to maybe
until i saw this 1520 level really
develop and
and that change of character came in
because you never know these things
can just keep running it was such a good
entry price i want to give myself
that chance to capture these crazy risk
to reward moves even if it is only on my
last
say fourth of my shares um i think that
is important to wait until
i see the turn and that’s the biggest
thing i really
try and improve on because i’m such like
a short-term momentum
and scalping trader that i often don’t
like to hold the pullbacks and things
like that
so as you can see as soon as i kind of
got that wick high and like my first
pullback below 15 that got me fully out
so working on that really seeing the
exit and being patient with the end of
my shares to
give myself that opportunity for
acquiring that information at a good
price
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