I am officially naming a new trade. SMB will call it the Trend Trend Trade. Below we explain through the trade of one of our traders, Shark, reviewing a recent trade in LPS, using the SMB Playbook template. The Trend Trend Trade is a set up where the long term trend and the short term trend align. We look for spots to get aggressive. We follow the trend. We look for a significant move. This is a trade to make your month!
Long Term Trend
Short Term Trend
Shark Notes:
- The stock is under yesterday’s low… 20 is a psychological level… there is a huge seller at 20 and buyer at 99 cents… can’t short on the uptick. Short here 2 lots at 20 with a stop above 2 cents… add two lots with a sell stop under 99 cents so that you are first on the offer (in this case you couldn’t get any stock really until 93 cents so I pressed escape because I didn’t want the slippage)
- Take off half on the first uptick. LPS hadn’t up ticked since 20 dollars… this is a change in pattern…
- Hold half until the close.. take one lot home overnight
- Very low risk high reward play where you can get a lot of size at 20 dollars for a 50 cent move
Bella’s Notes:
I love these trades. LPS is trading in one direction. You are focused on one direction. You are trading with the longer term trend (broken) and the shorter term trend (broken). You have complete control of your risk with a quick cover. You had a chance to get bigger below 99c ( in this case you couldn’t according to Shark but in many set ups like this you can). And as Shark mentioned there is some nice downside potential. These are the trades that make your month. This is an A+ trade.
Mike Bellafiore
no relevant positions
One Comment on “The Trend Trend Trade”
How did you manage risk, as I traded this and continuous pullbacks higher were vicious? No matter what level, there always seemed to be a higher 20 – 30 cent move.