what must you do after a profitable
trade not doing this will lead to
trading failure hi I’m Mike bellafiore
co-founder of SMB capital proprietary
trading firm located in midtown
Manhattan and I’m also the off of the
trading classic one good trade and the
playbook
in this video learn what we teach our
elite active traders to do after their
best trades too many of you are not
doing this and it’s not acceptable if
you want to be common an elite
successful trader
[Music] one of the reasons why I asked you to go
back in create a playbook for this
particular trade specifically is because
one it was one of the better earnings
plays of the month on the long side this
was one of the better positive earnings
gap and go finished his towards high add
a really strong you know killer
opportunity you know one of the better
opportunities for earnings plays from
the month so that was one reason but the
other reason I wanted to go back and do
it is I actually kind of felt bad about
what I said to you guys in the a.m. when
we were discussing this idea and you
know full trance you know full
transparency I asked a question I asked
the leading question I think it was to
you when you were talking about this
being a long idea during REM meeting and
I said well you know did they beat by a
lot and you said no and I said well they
didn’t beat by a lot and it’s in the
retail sector how much can it really go
up and so I think I left the improv and
I actually I’m sure I left the
impression that this wasn’t gonna be
something that really could go Ron and
finish at the high of day and so I think
I those are good questions to be asking
but I feel like I missed something so I
was curious as to what I missed
and since I’m a little bit busy these
days I figured this would be a good
exercise for the two of us and everybody
else in the room to sort of go through
together but look and so I I totally
missed something in terms of asking that
leading question and so I wanted to know
what I missed and test you to sort of
figure this out with me but you know one
of the things that I see that some of
you guys do in the room and some of the
guys out there do
the room which is super important is
that when you have a bad day you feel
super down and you know actually I was
having a common I’ve had a couple
conversations with some prop traders
actually both at different firms and
what I’m hearing is that they haven’t
been doing so well at the light and so
and we actually did really well last
month they trade different strategies
but there was some down this amongst
amongst traders and we’ll see that here
as well we will have some months where I
will say to you guys our desk is
underperforming
and here’s why I see our desk
underperforming and then we’re going to
have lots of months where we outperform
but you know for this for some of the
guys outside the firm that I was talking
to you know my my thought process was
you know when things are hard you you
want to be calm and you want to be easy
you don’t want to be so hard on yourself
but when things are really good when you
have an opportunity like this and when
the desk is doing well it’s the complete
opposite you need to be really hard on
yourself
and I think there are times when you
guys think I’m being a complete jackass
to you guys in the room I’m doing that
purposely because there are times you
have to be harder on yourselves ok
because this is a performance game and
the time to do that is when you see
trades like this so we we call these
check charts right this became a Jake
chart you have to be hard on yourself
with with with opportunities like this
you can’t miss these opportunities you
have to make as much as you can on these
opportunities this could drive a week
this opportunity could drive a week
right you know totally crushing this
trade could have made a week for any of
us in this room and so that’s a good
mentality to to adopt be kind to
yourself when your strategies
not working for whatever reason and
you’re going through some tough periods
which we all have but be really hard on
yourself when you make a good trade and
there’s a really good opportunity and
things are going well because is that’s
when you want to make more of it and so
you know for this particular opportunity
which I tried muffed in that an AM
meeting you know I sort of want to go
back and figure this out and so it
brings up a hugely important thing that
you guys got to do which is if you miss
an opportunity like this you need to go
back and you need to go through you know
why you did it or if you caught it you
need to go back and ask yourself a
really super important question which is
why did it work why was it so good why
was it so good why did it work super
important what was it about the earnings
in detail did I miss something
if I thought this was gonna be a good
trade and it turned out to be a great
trade what did I miss
if I thought it would like you know if
you were like me and you thought it was
gonna be maybe a fade or a tepid trait
what did I miss
what did I miss and so I’ve got to go
back and I’ve got a scrub the earnings
or maybe it was some sort of technical
set maybe was more of a technical
catalyst we talked about those two
catalysts there can be a news catalyst
and there can be a technical catalyst
I think somebody teed up PCG today right
say you a great great technical catalyst
great call on that today one of the
better stocks today right awesome I’m
like you don’t see that stock move like
that ever huge technical catalyst so we
can have a news catalyst when we have a
techno catalyst but you want to be in
the catalysts and so you know what was
it what was it about this stock that
made it so good so I asked you to sort
of go back and do this and this is the
best practice you all need to do on the
best
you all need to go back and look at the
Jake charts of the day and what I mean
by that is the clearer trending hi a day
opportunities the clear trending low a
day opportunities at a minimum the Jake
charts we calm the Jake charts it’s okay
if we call him the Jake charts right
I think they added it to investopedia so
we so that’s what we call the the trends
for the day because you do a really good
job you’ve done a really good job of
pointing them out of recent and so we’ve
named them after you so what was it
about it why did this why did this trade
work 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
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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 gonna learn more in a
couple of hours from this trading
workshop then from years of online
education good afternoon I’ll be sharing
with everyone today its strategy that
I’ve been working on for quite some time
now repeating it over and over again to
figure out what works and what doesn’t
last week just before at Thanksgiving
there was a earnings call for dks Dick’s
Sporting Goods and looked to capture the
squeeze right off the open its overall
the market at this time was currently
bullish and in a rally i closed over 300
october 25th and it’s consistently made
new intraday highs new you know new
record closes over and over it’s a rally
to this level that it was at I had to
stay investor sentiment was bullish and
there’s an end-of-year rally that’s
expected and this was just to complement
the trend to the upside when the markets
trending in the same direction that just
gives more confirmation that the trade
thesis the long thesis can be supported
by the overall
so the criteria for this setup really
revolves around an earnings release this
earnings release has to be positive a
positive earnings release can be between
one or a mix of all preferably all of
these scenarios looking for it earnings
per share and revenue you ever your
growth
besides that not only we want to see
growth but we want to see higher than
expected so they beat the consensus and
to top it off raising their guidances
full-year guidance is it’s just an extra
you know to push the stock further to
the upside I want to see a gap up prior
to the market open this is the indicator
right off of the earnings released that
people are really taking this earnings
news in a positive way people are seeing
this earnings as a push further in the
market value the highly short company is
the core of the strategy it doesn’t work
on everything so we’re looking for a
company that has a high degree of short
interest this can be measured through
either a short ratio a short percent of
the float or a number of shares short
this is just to see you know is the
short interest enough it’s high enough
where it’s going to make significant
impact on the price of the stock if
those shorts are too close and if
they’re covering that’s them that’s
these investors buying back shares and I
can just push the price further up
elevated our vault is always it’s always
looked for during in place stocks do you
want to see that there’s more than
enough volume to confirm the direction
of the move and in this specific case
which I’ll explain in a second the
institutional ownership being
exceptionally high you’re able to
identify the buying pressure be coming
from these institutions and you know
that’s you’re able to use that as an
indicator that it’s likely to continue
further elevated our vault just really
just another confirmation to say that
the section volume is coming in and it’s
likely to continue again longer turn the
uptrend similar to the market being in
an uptrend at this time this is just
another confirmation to say you know had
there’s further support behind this
directional move being near the 52-week
I just presents a breakout level this
can just complement again
trade and just allow a price point it’s
a trade-off of again the high
institutional ownership is just so we
can identify one on the tape are
institutions covering which if so
that’ll be likely to continue throughout
the day and to being the high degree of
institutional ownership you know we know
that they are more likely to get out at
first sign and not trade emotionally not
hold on to the short expecting it to you
know fill the gap to the downside
goodness this is a clear list of
variables you want to see for a good
long you could flip this around the
mirror image of this for as short would
also be fine for these variables as well
obviously positive earnings would be
very negative earnings so you could you
could do the mirror image of this as
well and create a some short
opportunities question
so when you say highly shorted company
do you have a criteria for what you want
to see the short interest to be the
metric that matters the most to me is
going to be from what I found through
testing the strategy over and over again
is going to be the short ratio this is
because a high short ratio and through
statistics it’s about six and a half is
makes it significant more or less and
this short ratio matters more because
that’s showing that there are X amount
of shares short times the average daily
volume so there’s the amount of shares
short or you can add you can add
significant buying pressure it’s having
a short ratio above six and a half above
seven is able to say that there are just
a extreme number of share of shares out
there that would add a ton of volume and
volatility to the stock you know if they
were to pour in and start to cover you
see the ratio what do you mean by that
so it’s the days to cover that’s another
term for it and it’s it’s a metric
taking or it’s a ratio that is the
number of shares short over the average
daily volume and again I’m not sure if I
made it super clear this is because more
important than the short percent of
float
because this shows that it can’t be
absorbed really quickly into the price
action the short float however I would
say roughly about 20 percent I think we
all have agreed that it’s that’s
significant and Thai enough where it’s
you know going to make a difference in
the stock and then number of shares
short also that’s you know it’s
different for every stock what would
make it significant but knowing that
number gives you the ability to say you
know when when is this buying pressure
exhausted when we’re should shorts when
did shorts have the ability to be
covered so intraday fundamentals for
this stock Dick’s Sporting Goods they
posted earnings per share and revenue
growth you over a year and the revenue
growth was five point six percent which
was higher than the industry average the
industry average for that same quarter
was three point eight percent you every
year growth so you know that number in
itself just gave a further further
support that people may pour into the
stock seeing as it’s growing further
than the rest of the retail sector and
it might provide a growth opportunity
earnings per share was 37 percent above
consensus so two out of three checks
there and finally they also raised their
full-year guidance having all three of
these is really strong I know
Armande know they call it the triple
threat something that sort and this is
to say that you know everything coming
out of the earnings was positive and
people don’t really have the ability to
take it and negative light therefore
it’s likely to get bought up so the ATR
1.07 average daily volume you know meets
the liquidity and volatility
requirements the number of shares short
I added here because this was a number
that I was able to use to say you know
when would shorts have had the ability
to cover and if so if you know say the
first 20 minutes of the open you know by
9:50 17.7 million shares I have been
traded throughout the day then I can
tell me that you know maybe the times up
of that buying pressure that extra
buying pressure from the shorts covering
the our vault was over 130 right off the
open
throughout the day it ended up being
nine point two times the average daily
volume was the accumulated volume
throughout the day the short float was
28% again that’s above the 20% that you
know that we’re using to categorize it
as a highly shorted company and the
institutional ownership being one
hundred and fifteen percent is saying
there are institutions that are short
being over 100 percent is showing that
you know institutions have this on their
books and likely there’s more than 15%
of those holdings as a short position so
how can the institutional ownership be
over a hundred percent institutions
released 13f once every quarter and they
have to you know what the SEC know that
they are holding an equity which is I’m
not sure about the correct with the
number is that meets the requirement but
if they’re blending it out then they
have to report if they’re short they’re
reporting it and if they’re long they’re
reporting it so there are a lot of
companies that can be over a hundred
percent and this is not saying that you
know even if it’s ninety nine percent is
not saying ninety nine percent of this
company’s composition structure is
institutions holding it to the long side
you know there could be a mix of short
interest in that and being above a 100
percent shows that there definitely is
institutional ownership to the short
side for this company question so árbol
9.2 here am I reading that right yes
okay and so good thing for you guys to
start to play around with is this is a
really strong stock we want to go back
and figure out why our above three are
below four would get our attention right
this árbol is 9.2 and so is there
something about stocks that have have
super high or ball that caused it to
trend to high of day are there back
tests that you guys can do to play
around with exceptionally higher our
ball and will
become a trend day so an idea for you
guys to play around with so you can look
at you know a three-year chart we’re
able to see that you know not throughout
this three years this was in an uptrend
but throughout the you know past roughly
two years now there’s been you know
while choppy there’s been an uptrend in
the stock this is again just to say that
the the long-term movement the
underlying direction in the stock is
supporting this long thesis so here’s a
two-day chart just to show what the gap
looked like the pre market high I’ll
explain in a second how we can use that
and you know I see this movement off the
open how extreme it is a intraday
technical analysis that pre market high
that was made of 4550 it’s good that it
retraced a little bit below that because
then it provides a breakout level this
provides a a high for the day that has
been met and that if it gets to that
showing that it’s strong and if it can
surpass it then a potential breakout
opportunity otherwise see down below
three separate times there was a support
put in at forty three fifty this is
showing you know where do I want it to
pull back to and if it pulls back below
you know further beneath 4350 that might
not be a good sign and right off the
open we see that actually hits 4350
supported and then moves up this
provides just this provides an opening
range low more or less that can use as a
stop how was the volume in the
pre-market it’s fairly light which if it
was stronger it would show that this
positive sentiment is is can be more
sure of the positive sentiment but being
late it’s also saying that there wasn’t
as much opportunity for shorts to have a
chance to cover so that just makes this
you know it just supports the you know
long bias and saying that likely off of
the open
that’ll be the first chance where a lot
of these shares short are going to have
to cover and pre market volume is either
way it’s going to be a positive if it’s
if it’s a lot of pre market volume it’s
confirming the direction and if it’s not
a lot saying that shorts haven’t had the
opportunity to cover yet well I like how
you Demark the pre market high right
here particularly in something that has
gapped up particularly in something that
is showing some strength those are if
you were not in it yet those are that’s
a good area to flag it’s also a good
area to flag that pre market support
area as well but you know when we get
above that pre market high people are
going to lose confidence in the short
idea right when you get above that pre
market high people are going to gain
more confidence in the long idea and so
good to note those two particular areas
like you did otherwise we just see after
the opening drive there is consolidation
at these higher levels and as Steve
explains and his gap and go video he
tells us to look for this consolidation
after price discovery and look for that
first move out of it and here we just
see how it’s continuing higher as price
discovery is the opening of trading yes
per your instruction I believe roughly
there yet 45 minutes Ben’s on thus it
depends the stocks not it’s not set in
stone but 3045 minutes is that price
discovery period and then if the stock
still holding up after that price
discovery period and holding above
levels then that gives us more
confidence that the stocks going to
trend higher so for the trade coming
into the open I had this long bias I was
looking for buying pressure and I was
waiting to see one I wanted to see our
institutions covering this is
identifiable by reading the tape and
seeing large buying orders large lots
and also just you know quickly taking
out the offers
bit stepping up you know other other
confirmations that are saying that
people are coming and starting to buy
the stock usually when this happens the
momentum off of an earnings drive off of
an earnings short squeeze drive it just
tends to happen to the extreme and
fairly quickly so looking over here I
see that 4350 level get hit and be
supported so right now I have a bottom
and I have a spot to trade off of it’s a
little bit choppy coming into the entry
position
so being hands-off and due to the
volatility not adding extra risk just
waiting to see if this 43 level is going
to hold a little bit longer after a few
minutes pass the volume is continuing to
increase and as the volume is increasing
the you know the bids are stepping up
the offers are being taken out and there
were large orders that were presented on
the table so because of this answer in
and aim to capture that extreme movement
into the move the momentum slows down a
little bit you can get your little
nervous but you see right as that bar
closes it comes back up to filled that
down move this pullback was immediately
filled and it was shallow enough that
you know that it’s it didn’t it didn’t
contradict the underlying trend moving
higher pre-market high we talked about
earlier was set at 4550 you know can
this be broken out of if so then it’s
likely to move higher
gauging just to see the strength of the
of the breakout looking for increased
volume looking for how fast they can get
above this level
a little higher there was a long term
inflection at 46 with the retracement
that didn’t get back to that pre market
high which I was using as a level and
that would have been where I got out as
it moves higher just waiting for that I
can first move into a consolidation
period and as its consolidating its
being supported at this long-term
inflection still have a long bias on it
the short squeeze may have been
exhausted by this point
I’m looking to see what is the first
move out of his consolidation period as
it’s moving higher still half into
momentum and allowing it to potentially
be a gap and go type of trade where it
consolidates post price discovery has a
first move higher and then trends
throughout the day so I’m leaving it on
with the idea of potentially holding it
until late in this session as the volume
starts to die out it’s showing that
there’s not going to be this extra
buying pressure the the long thesis
moving higher throughout the day may
still hold but it’s not going to be from
shorts panicking to covered the idea is
pretty much exhausted at this point and
it’s it was time to get out it’s getting
flat why did this trade work and why did
the setup work in general I think is the
process that senior traders here have
described to me and finding is setup guy
gathering as many examples as you can
and really being able to find patterns
in this data through statistics through
qualitative metrics of another wise and
then in doing so this process just
really takes a set of factors and there
was it down to say you know what is
important what is not important what
should I be looking for and that derived
from that is the confirmations you know
and before the market opens I had
attempted this type of setup enough
times where I knew exactly what I was
looking for
so why the trade work it was being able
to execute only based on seeing the
confirmations that I wanted that I
wanted to present themselves on the
chart you know this specific example I
did there was there’s support in every
direction the market was strong the
buyers were winning the fight on the
tape through reading the tape intraday
momentum was matching the long term
uptrend otherwise why did this trade
work so the short again to qualify as a
highly shorted company the float was 28%
above that 20% metric the number of
shares short was extremely high 17
points 7 million shares and this was 11
times the average daily volume the short
interest was just showing that if it
started to move up that there is going
to be a high number of shares short
there’s gonna that we’re going to add
volume
you know to the it’s the accumulated
volume throughout the day pushing the
you know pushing the chart higher the
institutional ownership being 115
percent that was just
that gave and it had the ability to have
confirmation on the tape you know why
did this trade work it was having the
set up knowing what I was looking for it
and having a metric such as this high
institutional ownership that allowed for
easily identifiable buying pressure and
you know just to top it all off there
were key levels that were right there
also there was a long-term inflection
point and the pre-market had the
pre-market I’m sorry the opening print
had retraced from the pre market high
and there were two different breakout
points that you know gave the ability to
label the chart and see where you needed
to move up against all in all it was the
trade setup and seeing the confirmations
that you know that created this this
opportunity well I’d add I’d add one
more thought which is it seems like
they’re doing better than their
competition yes yes the industry average
had been lower and there’s a lot of you
remember the last two weeks there were a
lot of retail companies out reporting
earnings and not not a lot of them were
were generally positive and that quarter
retail sales saw only three point nine
percent year-over-year growth and you
know Dick’s Sporting Goods just
surpassed it and really beat everybody’s
expectations yeah so you got you’ve got
a retail company doing better than
everybody else and doing better than
most people in the space all right so
people want to own that you’ve got a
really high short interest so you’ve got
natural short covers who have to buy
you’ve got a really big technical level
where people are gonna lose confident in
the shorts I don’t want to be in and on
the long side and some other and
institutional ownership as well so you
have a bunch of these things together
that are putting together why this was
such a powerful move always good
important essential to be going back
with these types of setups and
understanding why they
were so good long and short now it’s
your turn
which effective trading technique
discussed in this video are you going to
implement into your trading are you
going to study while your best trades
worked or are you going to be harder on
yourself after your best trading
opportunities let us know by leaving a
comment below right now