In this video, learn how to spot when other traders are screwed to tee up great trading opportunities for you. A junior trader spots a failed technical breakdown that screwed other traders and sparked a terrific trade for him. 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 spot when
other traders are screwed
to tee up great opportunities for you
hi i’m mike bella fury 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 in this video a junior
trader spots
a failed technical breakdown that
screwed other traders
and sparked a terrific trade for him
let’s get to work on sharing these
important trading lessons so
you can grow your trading account
so this is a trade i took on nike
following their earnings release
this is a little different than the
trade we previously covered for the
opening drive short
this is a midday reversal of the
downtrend
and i wanted to capitalize on the long
side opportunity
in the the trade setups i used was a
high day
as well as an earnings anchored vwop
reclaim
and then above that level is just a
simple wedge breakout pattern
all right so i’ll quickly go over their
earnings release this was
a blowout earnings i had put all the um
kind of the strongest stats in bold
and you can see their eps was a huge
beat
95 cents versus 47.
uh their revenue was a pretty strong
beat
a little over a billion and then the key
takeaways
was their online sales had an 82 percent
increase
and this is mostly due to the corona
virus pandemic
in a lot of their retail stores being
either shut down
or having like a drastic limit on the
number of customers that allowed to
enter and then a few of the other things
was
chinese revenue six percent increase and
then women’s apparel had a huge growth
of 200 percent
and then another interesting point was
for their fiscal outlook for 2021.
they uh had a pretty strong guidance
going in
while most of the competitors within
industry were avoiding guidance due to
all the
current uncertainty and then they also
had a really strong
outlook for the rest of 2020
for uh due to all like the holidays
christmas and uh
whoa right i mean whoa these earnings
are awesome
yeah and you’ll see by the the
pre-market chart this thing
just skyrocketed right when these
earnings were released
and then some of the alarming stats was
north american sales were down two
percent
this is their largest market so that’s a
pretty big shock
but i mean in comparison most of the
other
retailers their north american sales
were pretty horrible as well
so this is alarming but nothing uh too
fundamentally changing and then i
already mentioned they’re limiting the
storage of the customers
be good to know they decreased two
percent
what is that in comparison to other
competitors
yeah exactly i’m pretty sure uh but
these numbers these numbers are blowout
numbers
yeah especially online sales and even
women’s apparel this was kind of
hidden in their report which is
surprising but 200 increase
it’s i mean it’s around half of the
population in the world so i mean that’s
huge huge growth in that in that
category
if you want to learn three real world
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in a couple of hours from this trading
workshop than from
years of online education the first
thing i’m looking for is the anchored
vwops
so i want to see price consolidating
above
high of day anchored view op as well as
the high from the earnings release
and this is just kind of like a simple
line in the same that shows me
that most of the the average price a lot
of the short sellers they’re either
under water or they’re right at break
even
so that shows there’s a good opportunity
for more
continuation to the upside and then
after i see that a few kind of
categories i want to see is load day set
and then a pretty strong consolidation
you’ll see in this chart there’s around
an hour and a half of consolidation
after low day had been set
and so that that got me pretty
interested
and then what got me really interested
was when i saw this wedge pattern
forming
above my line in the sand which you’ll
see on the chart it was like 28
40 is just a super key level for the day
and that also kind of aligned with a lot
of the indicators i was looking at and
that was kind of my line in the sand
where i believe shorts are trapped
shorts are going to hit out and as well
as uh
bulls are going to be interested in that
level
and then for entries i want to enter as
close to the bottom of the consolidation
range as possible
kind of right around those anchored view
ops i was talking about and then just
for kind of like a technical entry
i like to see held bids as well as
pretty strong offers that are getting
decremented
right before the wedge breakout and this
was super clean on the tape that i can
go over
and then risk is the previous swing low
or break out of the consolidation range
so
hard stop is the swing low and then kind
of my fingers are on the hot keys
ready to hit out if i see this
consolidation
getting broken down how are you going to
define anchored view op
here i’ll actually i i go into good
amount of detail in the next uh
right after this sorry to cut in i’ll
just be quiet now
no worries but uh so this was nike the
previous day
and i i traded this the previous day for
this wedge breakout so i was pretty
comfortable
with the with the ticker how it trades
and it was really strong previous day i
don’t have it all the way to the close
but it ended up closing at high of day
and then when earnings came out
it was a blowout and then overall market
spy this is following a pretty steep
downtrend day
but then two days prior we had put in a
low
nice little consolidation then we got a
consolidation abrupt above
break out of this little trend and then
prior to the trade uh there’s a pretty
steep sell-off in the market
but buyers started to get interested at
this higher low so that kind of added
to my trade as well for a little quick
reversal trade
and then this is the price action of the
earnings release
and you can see by those numbers i was
talking about earlier the market just
love this
around a 17 point b
17 50 cent beat which is a huge bead for
a stock like this
and then going into this was a pretty
key range we were all watching in the
morning
this really tight consolidation at
all-time highs
and this is what got a lot of uh people
interested on the
opening drive short kind of the
breakdown of this consolidation
but most of our game plans in the
morning surrounded this
128 level 126 level which
correlated with this pre-market
consolidation
i wasn’t really too interested in buying
at these 130s
131 levels i was more interested for a
poll in trade
a nice consolidation and a breakout
which ended up working pretty well
and then this goes to my anchored v waps
that you touched on earlier
so i have one i don’t have the data
previously but this anchored view out
from over here is anchored from the
earnings release high
and then i also have another anchor view
op essentially at
hive day which is this is right before
the market opened
so these are my two gauges to see
kind of when short sellers are going to
be underwater
and so you can see most of these pull
ins to the height they anchored you up
or rejected
rejected rejected let’s think through
that so
you could have done anchored view up
in a from a lot of different times
you could have done it from
uh after the earnings release you could
have done it from
uh when we started opening when we
started trading
uh walk me through how why you’re using
the
high there for anchored view up like
anchored view op typically works
the best around news events so i always
will put one at the earnings release
high which is anchored yes you can see i
have an anchorage right here
because that’s kind of the blow off top
and that’s showing where most of the
volume has been done
and that’s also kind of shows me the
best possible
price the short sellers have so like the
premise of
angry bewop it’s volume weighted average
price
so i want to anchor it from the high of
day if i want to get
flip bullish i want to see price above
this
because that’s pretty much showing me
the line where the best possible
uh price is for short sellers when was
that put in what time of day is that put
in
the high so this is uh
around 9 20 yeah like 9
20 on the dot so about 10 minutes before
the open
and then this previous anchored view op
from the earnings release high was from
the previous day
uh before the market closed i don’t have
the time on here but i would assume
around like 6 p.m eastern
that’s good and what do you think about
the fact
that we hadn’t opened yet there had been
a ton of volume yet
as much volume as could be done
how are you thinking through that you’re
still in pre-market trading
pre-market trading is still going to
have a little bit less volume
that is a really good point is with uh
this indicator being based all around
volume you can see these volume bars
and after hours are nothing compared to
the open
so this is going to be skewed a good
amount
and carrying it in a low volume time of
day compared to if i were to just anchor
it right when this volume came in
but i actually did have it anchored
right around this and it’s pretty much
uh the same the same kind of price zone
in between
right around this range so i typically
like to anchor it around
high volume nodes not essentially
pre-market
since there’s lack of volume and it’s
gonna totally throw
off the calculation but uh
for this there’s still a good amount of
volume in the pre-market nothing
compared to the open
but it was still a pretty good just kind
of
visual aid to see where the trend is
going
and uh when the trend to the downside is
over
after using some of these anchored view
ops for visual aid
this is exactly what i was looking for
so we came in
right into this pre-market support you
can flip over
this uh 126 23 was a swing low of this
consolidation
as well as a i mean pretty strong level
pre-market and that’s ending
that ended up being low day at the time
of my trade
so he came in tagged it once tagged it
as well that shows me buyers are pretty
pretty interested and 126 was a key
level for a lot of us for a polling
trade
and then so after i saw this
consolidation for about two hours
above 126 we saw a little wedge breakout
pattern
and then we saw buyers step in higher so
this was the key
the key point that got me interested in
the trade we saw a breakout
but it didn’t fail didn’t come right
back to 26 and consolidate i wasn’t
as interested at this 126 level i got
really interested after we had this
breakout
and then we started holding above this
pre-market support resistance level
and it shows we tagged it three times in
the buyers one drop whenever it
came down the buyers got more interested
and started buying it at higher prices
so i didn’t want to get involved
although these
would have been some fairly good entries
i just couldn’t really spot
out the risk reward it was still a
little iffy the market was super weak
this day
so i wanted to wait for that extra
confirmation of price regaining
anchored vwop and this also aligns
perfectly with this 128 40 level
which was a really key level line in the
sand for me
you can see it was the initial price
that buyers started to step in
dropped out and then it acted as
resistance for about two hours
and then we finally got this big volume
breakout over the level
and we started to cleanly hold it so i
look i like how you’re using anchored
view up
that’s a very useful measurement
brian shannon does excellent work with
anchored v-wap
love how you’re using that but anchored
view op is just a technical indicator
right
yeah and so you’re basically saying i’m
making a technical trade
yeah exactly and you’re saying i’m using
this technical indicator anchored view
up
you know when i look at this i i like
the long there
using the anchored v wap but but
but but well what am i going to ask next
what am i going to pose to you next
uh like where’s my defined risk what
happens no
no i mean no i’m uh
you’re making a technical trade you’re
using a technical indicator
okay and so that part is as good for a
particular trade
but is that
the only technical trade you can make is
that the best technical trade you could
make
particularly in something that has
really good earnings
or are there other technical trades that
are better and you want to be thinking
about as well particularly in a blowout
earnings stock particularly in a really
strong market
market yeah exactly so
i i really don’t put too much emphasis
on anchored view up
it’s more of just like a visual aid for
me
and it i really only use it when it
aligns
with so 128 40 was the level i was
looking at
like without even anchored view up there
that that’s going to be my level
it just adds more confidence for me when
i’ll just say this and we can move on
but i’ve done this for a long time the
best trade the best trade in this
particular setup is when it breaks
the downtrend and the momentum is back
up again
that breakout
that you first mentioned you know right
there breakout consolidation higher
so that that breakout right there the
momentum is back up
that is a trade that you can make a lot
more money in
be a lot bigger in
make a lot more money in uh you know
really crush
more so than using that anchored view up
which is again a very legitimate trade
but just with the variables for this
trade
strong market strong stock blowout
earnings
good place to be buying stocks overall
in the market that you did a nice job of
showing on your daily charts for the
overall market
i want to be in
i want to be in that breakout i might
even want to be in
the double the double bottom
support of the pre-market
support area i don’t really love to make
those trades because to me i want to be
that’s just me though but i could argue
that that’s a really good trade as well
but anyway i just want you to understand
that
that’s a great trade that breakout trade
right there
i want to be in that you know when the
momentum starts to go towards the upside
when the selling’s out of it
and the momentum starts to come back in
i mean you can get a full day’s
day’s worth of buying just from that
spot you can get a couple of days worth
of buying
just from that stuff from that spot and
so something to think about
yeah i mean that’s a really good point
right when you see that first sign of
life
it’s definitely worth getting involved
and if you’re not too comfortable at
least
maybe a half size smaller size and then
right when you see the trade starting to
work out for you
you already have a solid average price
and then you can start adding to your
position and get much bigger
with that confidence that you still have
entries from
a great price that shouldn’t really be
hit again if this is gonna
do a full 360 on the day or 180.
so i’ll keep moving on but this is just
kind of the reasons for my bullish
bias on the trade and then this is the
uh kind of the technical setup so i
already talked a lot about
regaining these anchor view ops
consecutive lower highs coming into this
breakout
and then this is something i like to see
a lot it happens a lot more
in this market that we’re trading in
we’ll see these flat bottoms
these like really clean wicks to a level
but then before the actual breakout
we’ll see
price leak through and then buyers get
interested at these cheaper prices
it kind of throws off all the weekend
longs that are buying within
this consolidation just risking a break
and then we get that instant rebid
and you got and you got some momentum
traders short you’ve sucked into the
momentum trader short
yeah there’s momentum traders who are
saying you know as an active short-term
trader this stock’s up too much
the earnings are good but it’s up too
much should pull in and they’re
they’re sucked in short two the other
side of the trade
are the longs hitting out and the shorts
hitting in yes so
exactly i love to be entering kind of at
a point where it’s catching everyone off
guard
and then it gives you the best risk
reward opportunity
is if all the longs are getting tapped
out here momentum shorts are hopping in
but i’m buying on this dip
this price really shouldn’t be touched
if this breakout’s gonna work
and then once we see these consecutive
lower highs
that just gives you the really strong
confidence in the trade
so coming in this was kind of my entry
zone i
actually had a really small size about
like 15 percent
at 128.40 and this is kind of
just based on uh this is something you
talk a lot a lot about mike
just by price just getting a little
feeler size by price
i’m like this is the the bottom of the
wedge
no and i i want to point out that that’s
such a obvious level
and these really do set up great trades
when a stock should be going down
and it looks like it is going down
and it’s clear to
lots of different traders even amateur
traders
and it leaks down as you say it leaks
below support
that support area that 128
50ish area 128 40ish area
and then and then you know gets below
those prices but can’t
and then we bids above it again
those are great trades when a stock
should have traded lower
and doesn’t when a stock should have
traded higher
and doesn’t
those set up really good trades and i
would say one other thing about
this not only being a very clear support
area
as it touches one two three four five
times
but that support area is also what
it also is above a pretty
clear defined resistance area you know
right before that there was
you had some resistance areas that were
pretty clear one two three four
five times can’t get above a certain
price then does
pulls in one two three four five a bunch
of times it holds above that area as
well so that’s a big important technical
area
everybody can see that you don’t you
don’t need to
be a a certified technical analyst
to be a you don’t need to be a cta to
see that trade
and uh so i’d add to that
those are those are really good setups i
mean there’s a lot of people playing
around that area
and uh it’s it’s not going down is it
there they re-bid it exactly and i also
want to point out this
is a 30-second chart so just the time
spent underneath this uh 128 40 which is
my
line in the sand for very obviously
obvious reasons we’ve talked about
so it could only spend less than a
minute under this zone without
re-bidding
it had like one minute of steep selling
and then
the next 30 seconds it rebid that whole
move
and then 30 seconds later is already
back in that range
so after i see that where this is kind
of like a time trade
where if it starts consolidating and
spending time under 2840
it’s a scratch trade that’s my whole
thesis is wrong
the only way for this trade to work is
if it drops and re-bids
within like a two three minute period so
this is a
really based on time this needs to drop
and re-bid
instantly otherwise you could just get
stuck in
a pretty pretty long chop period or
128.40 starts to act as resistance and
next thing you know we’re heading back
down to
low day and so i’ll quickly go over my
trade management these were just the
feeler size by price i was talking about
this was
pretty much nothing compared to my
actual
sizing this is 15 and then once we got
these leaks below i ended up getting
really big in the position
with a hard stop below these previous
swing lows
and then like i said it’s it’s a time
it’s a time trade
so if this which sound starts i’m in
from here but it starts
holding below 28.40 i’ll probably hit
out the position
for scratch trade but right we see this
rebid
come down sellers try to push it down
again we make a higher low
another higher low and then we’re off to
the races we get the wedge breakout
and i just covered a little bit of my
risk for uh these initial entries it
wasn’t much size
and then these are all just scale outs
and then
up here is where i manage most of my
size
okay and so i just want to i want to
teach you just a really advanced concept
very quickly and we’ll talk more about
this
uh as as you get a little bit more
experience but you see the consolidation
can you just highlight the consolidation
uh right before it leaks below that 128
40 area
and then it leaks below there and we
talked about how there’s some people
short now and there’s some longs that
are hitting out people are looking at
that 128
40 area and they’re pouncing when it
gets below there
okay and then can you see the top of
that that range before that about 128.90
it hasn’t really traded much above
128.90 128.80
and so you don’t really expect
for that stock to get much above there
if you’re looking at that chart and you
see hey that’s a lower high there
from from the before the high and so
what gets that stock to get above even
that 128.80 area
and why you shouldn’t make why you
you’ve got to be able to
[Music]
be careful about assuming this is going
to make a new high
when it gets above that 128.80 is what
it’s that the people who hit that below
128.40
can cause the stock to trade above 128
80 and one twenty eight ninety
the over exuberance that is breaking
down
and the volume of the people that get
sucked in there can cause us to go above
that one twenty eight
eighty and one twenty eight ninety area
and we gotta be careful
that we assume this is going to go to
higher highs because of what happened
below that very important level you got
to be able to see the whole field
and understand that it’s good that it’s
above 1
128 80 and 128.90 it’s good it
probably more likely it’s going to work
but but but
maybe all those people hitting it below
40 cents are gonna be are the people
that are covering
and and and we got to have time
and a hold above that 128.80
before we can conclude that it’s gonna
it’s gonna go higher does that make
sense yeah
exactly advanced thought admittedly
we’ll talk some more about that
so this is my reason to exit this was
actually
probably my cl some of my better exits
on a trade as you can see
by some of these exits and i was out of
full size before this steep flush
and this was a 100 due just to watching
spy
right next to my nike trade and you can
see so this was the
uh that 129 level that we had started to
consolidate
above right in this range above these
swing highs
so this is kind of a do or die spot if
it doesn’t hold this level
it’s probably going to flush back down
to this 128 40.
so i’m being really uh watching the
market looking for any signs of weakness
and at this point spy is trading in a
pretty tight range
as you can see here and nike was also in
a
somewhat tight range some flat bottoms
right at this 129.
and then you can see spies started to
break down so it was leading the
breakdown at like 127 eastern
spy had already broken down and was
breaking down to this consolidation
range
but nike was still holding this 129
level
holding 129 and then by the time uh
nike breaks down spies already hit
pretty hard so i actually have a tape
example of this so
i thought this was really good exit
signal it pretty much gave me
a get flat signal two minutes before
nike broke down
just based on watching spy
really good really really good we’re
already uh
into the breakout we’re approaching we
had just regained this 129 level
and this was also a previous swing high
and
psychological level also a lot of
pre-market significance in this level
so ago this is the first time we’re
starting to get that push above 129 we
had a lot of failed attempts
so now for me to stay in this trade i
need to see 129
hold as well as the market holding that
consolidation range
and i actually uh split screen and show
the market as well
so we end up getting this push i take
off
around 35 shares just to cover more risk
because this was also level that we kept
wicking into
and we just couldn’t hold
i’ll fast forward this a little bit so
right around so now you can see this
129.15 is starting to be pretty strong
resistance this is one
two about five attempts to break
above this level and we can’t so now i’m
on more of the defensive side as i said
this
is the level it needs to see some more
strength or it could fall out steeply if
it doesn’t hold these previous swing
highs
and so we’re not really seeing too much
buy interest above 129 which is getting
me
like i said more defensive on the trade
if we can’t hold 129
i’m really not interested i was able to
catch this breakout with really no
downticks at all
so i’m expecting somewhat of a downtick
so now we start to
break down and you’ll see 128.99
is the actual level i’m watching that’s
where all the size is at
that’s what’s been supporting in this
range for a while
hey really good job of noticing that
super important
observation you’re making there where is
a ton of volume being done
if it gets below that price i expect it
to go to a lower price and go find a new
level
and you do that by watching where
most of that volume is being done and
seeing if there’s anything unusual on
the tape that you can pick up so
let’s not gloss over that really
important observation you’re making
there
yeah because if i was just let’s say i’m
just looking at this 129 level
it drops 129 and i hit out just kind of
out of panic
but then 128.99 is the actual true level
i’m gonna be pretty irritated that i hit
out for one pretty much one center risk
when
i’m waiting for this 99 level to drop
not the the whole number
and you can see it’s starting to become
a pretty strong level
down here you can see every attempt it’s
having a really tough time breaking down
from 128.99
and so now i’m getting pretty defensive
i have my default chairs set for
50 percent of my position
because the premise of this trade is i
wanted to hold
majority of my core for an extended move
above
into like the 130s but i also don’t want
to be stuck
holding my swing size if we do get a
breakdown
so coming up we see we finally regained
this 129.05
and so now i want to see the buyers step
up i don’t want
them to step up two three cents and just
fall out like what’s
happening here so you can see i actually
cut half of my position
in the o2s just after
it was contingent like we finally got
buyers to step up step
up and then they just totally fell back
out and so now for the
majority of my position i still have uh
i’m having my risk on just on a break of
this 128.99 level
then i think i actually pull up
spies as well oh here so i hit out
so now we got another push
this is where you need to see buyers
stepping up
so this is showing that there’s pretty
weak buying in front of 129
we get that push into the 129.08 and we
just can’t hold
we come back down to this level actually
i was watching spy at the time this was
at the exact time spy was breaking down
and then you can see there right when
this 99 level was cracked
i hit out instantly in in the 98s i
expected i i wasn’t getting it filled at
the 98s i was
expecting a pretty steep fallout here
but i’ll fast forward a little bit where
i have
yeah so you can see this was just on my
other screen i wasn’t recording but
i was watching spy as well i just wanted
to pull it up on the tape real quick
here
so you can see how how drastically spy
is leading this breakdown
so while i hit on the 99 spy
just had a nasty candle that broke out
of the consolidation zone
and it was looking like it’s starting to
get out so just by hitting out
right when i saw spy breaking down no
buyers were stepping up
above a 129. those were just the only
two reasons i needed to be flat on the
position
and then you can see this was a really
good exit because we came all the way
back down to my entries
entry level and then we ended up
finishing at low bid
so that was just a really good tip going
forward when you’re trading a market
stock
sometimes you can get much better exits
just by
watching the market especially at these
do or die
spots where you’re going to expect a big
fallout if this 129 buyer drops
but if you can get a little hint seeing
that spy just broke out of the
consolidation
most likely this 129 buyer is going to
drop as well and
we’re going to get a pretty steep flush
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