My primary stock on the Open was GMCR. It is a classic momentum stock that had fresh news and a large pre-market gap. This type of setup is usually my #1 choice to trade on the Open if available. I have internalized the possible price patterns for this setup having traded it hundreds of times over the years.
My second choice was MCP a former high flyer that had announced they were buying a company in their space that would help them to vertically integrate their business. At least that is what it looked like in the article I read on Benzinga. MCP has been beaten down for the past year and was in a steady downtrend on pretty much every time frame. I thought that perhaps today’s gap up would be the beginning of a reversal of its daily and weekly downtrend. But if not there would be some money to be made on a gap fill.
Here is the video from our AM Meeting where I discussed which price action I would look for to determine whether to trade it long or short.
The bullish price action discussed in the video played out once the market opened so I got long. The annotated chart shows how I adjusted my trailing stops a few times during the day. I sold most of the position and will look to reload closer to 29.50 on Monday.
Steven Spencer is the co-founder of SMB Capital and SMB Training and has traded professionally for over 15 years. His email is [email protected].
Steven Spencer is currently long MCP
*live trades discussed in this post took place in T3 Trading Group, LLC a CBSX broker dealer
3 Comments on “Why I Traded MCP Today”
Hello Steven,
Thanks for your review on MCP. While reading this i was wondering quite fast: did you only do an entry at the first arrow and close a big part of the position near the end of the day or did you micromanage this trade for extra $$ and better risk management?
generally i’m off the desk by 10:30-11:00 o’clock so i not able to actively manage these trades like i could a few years ago. but i was able to add to the position when it started to hold higher around 28.50 and took some off at 29.50ish and then sold some into the close as it had greatly exceeded my intra-day target.
Hi Steve,
Thanks again for another great post! In the above example you said that you have your stop at 28.39. (I believe the low around that consolidation area was 28.45ish).
My question is, do you generally place an actual stop order at 28.39, or its it a “soft level” where you set an alert around that level and see how it trades before hitting out?
I got really curious about this from watching your previous Do the Right Thing webinar, where you mentioned a couple of times giving “XX cents of risk” to a trade.
I would think a stop order (and then re-evaluating if stopped out) makes sense so you can better focus and prevent the chance of outguessing yourself? Would love to hear your thoughts on this. Thanks!