In this video a SMB trader details a stock trade you can make right on the Open. Matt explains how this fast trade on the Open sets up and how to properly execute it.
View Video Transcriptthis is matthew with smb capital here to
share with you a playbook
in neo an electric vehicle company this
playbook will be focusing on an opening
drive continuation play
which is a trade i’ve really been trying
to build out in my first year here at
smb
as it’s been both my most successful and
my favorite trade to execute
as it’s fast natured it’s a lot of tape
reading
and a lot of quick entries and exits
which usually plays to my strengths
i hope you enjoy listening to the video
if you have any questions feel free to
leave them and we will try to get back
to you
[Music]
today we will be looking at a playbook
for an opening drive
continuation play which is a trade i’ve
been trying to build out
for most of my time at smb now this will
be
a playbook for an opening drive
continuation which is one of my favorite
trades that i’ve been trying to build
out here
trade strategy you want to make sure
you’re finding a stock that’s really
in play elevated arvol anything with
fresh news
anything that’s breaking out near major
technical levels
and then for this trade specifically you
want to have good pre-market levels to
really risk off of
to make that initial move
off the open so that way you can look
for pullbacks and continuation
over or under those major levels in this
case it’ll be
an opening drive long trade so we’ll be
watching
an initial breakout and then the first
major pullback to
get involved long for more continuation
after seeing accumulation on the open
so the catalyst we were trading neo
um the electric vehicle company in this
trade
which also is in the same sector as
tesla and sometimes they trade in tandem
so the news was neo had suspended their
vehicle production
in a manufacturing plant for five days
because there’s been an overall
semiconductor shortage
for um just the
[Music]
industry itself tesla also had a
negative stock reaction off this news
because
semiconductor shortage affects them and
then
the competition in the ev space is
really
increasing and the global chip shortage
is making a lot of pressure
a lot of downside pressure on these ev
names so we’re watching
for a long play on this one in terms of
this has been beaten down recently
maybe this could be a good day for a
good buying opportunity
as people that believe in the value of
the stock more or
just see this as a good technical
sell-off an area to risk against
these can all come into play so the
intraday fundamentals
five over five times our ball which is
very significant
and significant in a good way as it can
just lead to those outsized
moves giving us a greater risk to reward
you can see 58 billion dollar market cap
so this is a substantial company now
they do have
a lot of cash behind them there are a
lot of institutions involved
so if they really step in and we see
that trending off the open
you can really expect to see more follow
through if there’s major institutional
buying
as well as day trading buying and thing
technical buying off
the elevated arvol in the interest there
so this is what the technical chart
looked like coming into the trade um you
can see
previously had been trying for the prior
week to consolidate between this 40 to
45 area
and with this negative news pushing the
sector and you know downwards we pulled
into this major 35 level
as you can see is where we really based
about a month before this trade before
trying to go higher
so this could be a good area that people
are looking at longer term to come in
and defend the stock
and really buy up that support level
on the hourly you can see it a little
more clearly it uh
really pulled into that 35 in the
pre-market
in cs’s post market and then in the
pre-market this news really broke
sold off about three dollars per share
so we’re thinking if it’s holding lower
off the open there might be a good
chance for
a bounce um this is kind of what the one
minute looked like and i’m showing you
this because i want to compare this
one-minute chart to the one-minute chart
of tesla
and show you how they were also kind of
trading similarly in tandem
to give you a little more conviction
that there is strength and overall
buying
not just in this name but in other names
within the same industry
and that could be a factor
of the institutional buying really
stepping in and giving
that trending move so you can see now
the tesla one minute chart
both had a strong opening drive a small
pullback
some continuation a pullback and some
continuation
so you can really see just these
pullbacks all getting bought up both in
tesla
ending neo off the open
so pre-market this is what we’re looking
at coming into the day before the
markets opened
we see we broke through this 737 level
that was like your real
post market inflection pulled down
and kind of started basing between this
like 3460 to like 3480 you can see
multiple times
made a new low here and then failed to
hold lower
and that’s the kind of our low of the
morning now that we’re gonna be watching
and you can see this 35 like 20 level we
touched it multiple times when trying to
hold under
so if we really get momentum and volume
through that level
i mean there’s a large gap to fill a lot
of good rr there even if you’re risking
to the bottom of the range
but in an opening drive continuation
play you don’t even have to give it that
large of risk because we’re going to buy
the first pullback
rather than being in on the initial
momentum move where it might be a little
harder to size
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than from years of online education this
is what the stock looked like on the one
minute
during the intraday first hour
from 9 30 to 10 30. and you can see
this 35 20 level the two minutes prior
to the open
starts to consolidate there immediately
off the open
breaks out on good volume and then this
first major pullback
is where we’re gonna get long and look
to scale out
so the real importance of how you get in
here is the tape
this 36 dollar level i’ll show on the
tape both on the breakout
and on the breakdown are really
important levels that is both a
psychological level
and clear action level on the tape we’ll
see that on the initial breakout before
we break higher we really stall
at this 36 and then on the breakdown as
well we really stall
at that 36 break under and then fail to
hold under
so these the breakout and the breakdown
and how that 36 level reacts is really
going to be
um the key make or break point in the
trade as these opening drive trades are
fairly quick so i’ll skip around to
the most important parts top left chart
is the five minute chart of neo bottom
left
is the one minute and this bottom center
times and sales
is where we’ll be executing on the level
two in the center and the times and
sales to the right of it
so off the open we got this strong push
and now i’m going to show you
how we break above the 36 level and how
it kind of needs
time or i’m sorry and how it just like
breaks through the level even when
offers are stacked
so we’ll see it’s like kind of
consolidating higher
just bids stepping up nothing crazy here
looking to see more momentum to come in
to get really through that
36 level we’ll see on the offer
114 at 36 that’s bigger than anything
we’ve seen all morning so
that could be the first major area they
try and hold it down
but if that just breaks through then
this is looking quite strong
and you can see it takes it out and
jumps 20 cents instantly
and is now still holding higher so
that’s a really good i i it’s really
good mentally to note
okay before this could break higher it
needed to take out all those offers at
36
so if it pulls back to 36 we want to see
are people still getting involved there
and we can see here that it’s pulling
back to 36 and really holding now it’s
only getting below it a couple cents
no momentum is coming in below that
level
uh this bottom times and sales this
small one is block orders so larger
orders we’re not seeing any red block
orders
and we’re just back over that level
quickly so
they really did defend that level after
breaking over it
now i’ll skip ahead a bit we just kind
of grind higher
and then i’m going to show us the first
major momentum shift after the breakout
and
so now we’re going to look at the
breakdown under 36
and the next pull into 36 to see if we
can really hold
so he broke out over 36 held it made a
new high
so this is a traditional opening drive
move and now we want to see if this
first pullback can hold
uh that first area it held before
breaking out which in our case is the 36
dollar level
so you often expect it to test under the
level um
before it really holds it’s not just
going to hold perfectly the sense it’s
kind of a zone
so i’m just seeing that how it reacts
under 36 is it breaking down
is it getting momentum and right now the
answer is really no
it got into the 70 cents once there and
that was really
it and then these 80s are holding and
now right there
makes a new low this should really break
back down into like 35 20 into lows if
there’s no
there’s no buying but we’re right back
into the 35 80s
i’m thinking about starting in long here
for reclaiming that 35 and see my first
century is 35.95 but not my full size
just a feeler
i want to see it keep holding for
another
well 15 30 seconds just until that 36
level picks up
i add in double the size there at 35.98
before we get over 36.
so really just starting to build in here
as i’m gaining confidence i’m just
seeing this 36 area get defended
when we get under it it’s not really
breaking down
still just spending time around that
area
and then we just kind of get a hold and
a slow break higher
i’ll show you our high a day break here
break new high a day
um i’ve sold a fourth of my shares into
the high
looking to hold the last three fourths
into this 37
and like 37 50 38
like like if everything works a plus but
realistically i’m gonna be getting out
over 37 when i see the momentum really
shifting
um so that will be almost an atr move
um you can see this breakout through
high a day isn’t the like
fastest breakout it’s still just bids
stepping up slowly
so i want to see that trend continue um
and when i kind of see that that pattern
of breaking out
change then that might be a reason to
exit so i sold some into 37 there which
is a psychological level and you can see
the tape slowing there
and there was an offer holding it there
so getting down to half my shares
knowing that 37 as well was the bottom
of that pre-market
or post-market channel and support
so if short sellers want to come in
from the pre-market that think this news
is substantial that this should be
more of a negative catalyst this could
be their area to get involved
so over 37 we stall again i take out a
bit more
getting down to my last fourth as i am
seeing that momentum
shift now um we’re getting back under
37.
and then we’re going to keep grinding
higher and i am holding my last fourth
of shares
i’m going to show you the reason to exit
now
and that’s because we get a weak new
high day break
so you can see we had a new high like 37
40. we’re pulling back trying to hold
this 37 area to make another new high
and we’re going to see how weak this
breakout is through a new high
we’re in the 30s you really expect it to
go here it’s holding at the top of the
range it’s getting pretty extended on
the one minute so
this is going to break out it’s kind of
kind of needs to get some real
confirmation
offers here stacked at 37.49 they’re
trying to decrement them
they can’t
so that’s that’s a clear sign for me
that i’m going to be
getting ready to exit and i took off
another portion so now i’m just down to
an
eighth as i saw those people really come
in
into a new high a day and reject it and
hold it down on the offer
and the speed of the breakout was pretty
shallow um
and now we’re going to see my final exit
when we break down through this 37 area
which we’d kind of been holding when we
saw before we just made that new high a
day break
so we’ll just skip ahead to there
we’re going to see i’m going to say okay
if i want to leave on a little portion
probably needs to hold 37 and really
keep up with momentum
otherwise i’m expecting this to have the
have the
chance to pull back to 36.50 or even
back to 36
um as the volatility coming that comes
out of the market
we’re seeing moves get retraced a bit
more often
in the past month or two than we have
say four or five
six months ago so that’s been something
to note and we break under that 37 level
i take my final exit at 36.96
and then i’m just kind of hands off
watching how this trends
and like i said we could see a major
pullback we could see a rebid
kind of saw a pull back to that high the
3650 they rebid
and then it just kind of chops around so
glad not to
mess with that because you can see it
does retrace back to the middle of that
range so
noticing the momentum shift at the top
can really save you an extra
half a point a point on stocks like this
that can
just have outsized moves to both both
both sides of the range you gotta really
stay open-minded to how these breakouts
react and
where sellers could be stepping in to
change that momentum
so this is what the executions looked
like on trader view
um as you can see entry right below that
36
area which we watched on the breakout
and on the pullback
taking off a fourth into high a day in
case we
fail to make a new high a day that’s um
often
a pattern you can see take off another
fourth
into the new high a day when it slows
again a bit more as it slows the
momentum really comes out
now i had a very minor add um a fifth of
my regular size
or no no sorry an eighth of my initial
entry so pretty insignificant
but just trying to think oh maybe if it
does pull back hold that
37 area but then you see just quickly
gives out and i get out so that’s my big
point of improvement on this trade is
thankfully the ad was pretty
insignificant in terms of p l
but the principle of that ad and what
i’m trying to build out is just not
there
um there’s no reason to be averaging up
my price like that
it was just much too aggressive to add
up there
since the meat of the second move had
already been made because we had the
opening drive
and then the continuation so to get even
more continuation it’s really going to
need some time and i even said could
pull back that 36.50 area
so if i had done that and waited for the
next major breakout
our next major pullback which happened
at this 955 area
where we kind of hold this first
breakout area this could have been a
great
value buying opportunity for a longer
term trend on the day
like a five minute pullback and take
smaller size
your risk to this 36 breakout area we
saw
or if you want to give it real like real
swing you could risk just a low a day
and search for four or five points um
so just thinking how i could have stayed
involved with the stock
how i could have used my prior tape
knowledge from trading it
to create more ideas throughout the day
we’re seeing more opportunity coming
later in the day now and these morning
sessions aren’t always the clearest
so really focusing on how i can become
more of an all day trader
and really build out my playbook with
different
types of trades in this lower volatility
environment i think will do me
really well in the long run so just
trying to really
make my trades more detailed be more
selective in what i’m taking
and hopefully being able to define my
criteria better because of that
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