Happy Sunday, Traders!
What a week that was last week. A sea of red and a whirlwind of fear dominated the market, and as a result, there were a host of brilliant opportunities.
The range expanded, and volatility increased. However, if you traded with preconceived notions and bias, then you may have found yourself getting in trouble. In environments such as this one, it’s more important than ever to double down on the basics. That is, to respect and react to price action, stick to your niche and risk limits, and always ensure that you have defined your risk before entering the trade and have your stop(s) in place.
Quick side note: My travels are coming to an end. I will be back in the States next week, and it will be business as usual for me. So look out for next week’s in-depth watchlist AND video watchlist as well.
Alright, for this week, as it’s my final week abroad, I’m keeping it simple and primarily looking to react to specific plans if conditions are met.
HUBC Reactive Swing Long OR Short
Hub Cyber Security (NASDAQ: HUBC) is a small-cap, relatively low-float stock with an $81 million market cap and 42 million float. The stock began to surge on October 19 after the company announced its participation in strengthening Israel’s defenses amidst escalating cyber threats.
Since then, HUBC has steadily climbed higher after an initial pullback and now consolidates near a critical breakout zone at $0.80.
My Trade Plan for HUBC:
Two short-term swing plans for HUBC stand out to me.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
The Long: If HUBC can consolidate in the upper portion of the range, between $0.70 – $0.80 for a couple of days, then I will get long half of the desired size against $0.60. I will double up on the long if it breaks over $0.80, with increased and sustained volume and holds above. At that point, I will also increase my stop to $0.70, as I would not want to see the stock break back into the low end of the range.
If the breakout occurs with sustained volume, then naturally, $1 becomes the next psychological level. Typically, for a position without precise levels of resistance that act as profit targets, I will watch price action more closely to identify potential shifts in momentum, which act as a reason to take profits.
That is what I will do between $1 – $1.50, looking for reasons to exit my position. From a technical perspective, such causes include an uptrend break, consecutive lower highs, or failure to reclaim the intraday vwap.
The Short: 2 potential setups exist for me to get short for a 2 – 3 day swing short. Firstly, if the stock pushes over $0.80, traps long, and then fails and trades back near the low end of the recent range ($0.70), I will get short with a stop near $0.80. My target for that short position would be a move near $0.40.
Secondly, if the stock consolidates further for a few days and then breaks its uptrend on increased volume, I will get short versus the most recent lower high on the hourly time frame. The target for this position would also be near $0.40.
QQQ Relief Bounce
Now, I am certainly not attempting to catch a falling knife…because that never ends well!
With lower highs and lows across the board and in the QQQs, the trend is very clearly to the downside. However, in the very short term, things are beginning to look a bit stretched to the downside, and a short-term, potentially 2-day bounce opportunity could be shaping up.
Here’s What I’m Looking For:
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Using the rising 200-day as a guide, one scenario I am thinking about is the following: The QQQs trade near its 200-day, $339, and snap back intraday to confirm a reversal / make consecutive higher lows and higher highs intraday above vwap. I.e., a washout near the 200-day and buyers to step in and hold. If this occurs, I will get long against the LOD, targeting a move near the declining 5-day / downtrend resistance of around $350.
As I mentioned, the overall trend is to the downside, so I am not looking to be a hero. I am looking for a relief rally as things might be slightly stretched in the short term. If the QQQs close high of the day / at the profit target on day one of the bounce, I might even look to cover half of my position, trail my stop to the most recent higher low on the hourly, and hold the remainder overnight for a potential gap/day two continuation.