Bar by Bar Analysis of 5 Simple Trades

Key Concepts

Day Three Breakout (Liquidity Trap Setup): A trading strategy capitalizing on a breakout on the third day after a catalyst, characterized by high volume on day one, low volume on day two, and a breakout of the day two high on day three.
VWAP (Volume Weighted Average Price): A trading benchmark that gives more weight to prices traded at higher volumes.
Catalyst: An event or piece of news that is expected to cause a significant change in a stock’s price.
Arvall: A measure of relative volume, used to identify stocks with increasing trading activity.
Opening Range Break (ORB): A breakout from the price range established during the first part of the trading day.
SMB Hitchhiker Setup: A strategy involving buying a pullback to the 9 EMA on the 2-minute chart, often after a failed breakout attempt.
Trailing Stop Loss: A stop-loss order that adjusts automatically as the price of a security moves in a favorable direction.
Power Hour: The last hour (or 1.5 hours) of the trading day, often characterized by increased volume and volatility.

Five Easy Money Trades & Afternoon Momentum Trades

This presentation details five recent trading opportunities identified using specific price action triggers, emphasizing clear entry and exit points. The speaker, Mike Bellofury, focuses on trades driven by catalysts and repeatable setups, aiming for a high risk-reward ratio. He also addresses afternoon trading strategies, often considered more challenging.

1. IRBT (Iroot) - Day Three Breakout & Swing Trade

Catalyst: Commerce Secretary Howard Lutnik’s meetings with robotics CEOs and potential executive order supporting the sector.

Strategy: Identifying the most active stock within the robotics sector using Arvall sorting.

Day Three Breakout (December 5th):

Setup: High volume on day one, tight consolidation on day two (low volume “inside day”), setting up a potential liquidity trap.
Trigger: Break of the day two high at $3.25.
Entry: Long on the break of $3.25, with a stop loss placed below the initial volume surge. Entry possible at 8:00 AM.
Profit Target: $5, achieved quickly. Partial profits taken into momentum off the open, specifically on the reclaim of VWAP and breaks of the morning high and pre-market high.
Risk/Reward: At least 5:1. Acknowledged lower win rate, but significant potential gains on winning trades.
Swing Trade Potential: Looking for a pullback to the 50-day Simple Moving Average (SMA) for a second leg higher.
Second Entry (Swing Trade): Entry on December 6th when the stock held the 50 SMA near $3, triggered by high volume breaking the intraday high. Stop loss at low of day. Held the position for multiple days, scaling out as the price increased, ultimately exiting near $6 for almost a 100% gain.

2. PL (Satellite Company) - Earnings Day One Catalyst & SMB Hitchhiker

Catalyst: Positive earnings report – accelerated revenue, strong backlog, first profitable quarter.

Strategy: Focus on stocks holding their earnings gap-up move.

Trade (December 11th):

Setup: Gapped up to all-time highs, resistance at $16. Holding the gap-up overnight and into pre-market.
Trigger: Push above $16, followed by a failure and reclaim of VWAP, creating a classic SMB Hitchhiker setup. Pullback to the 9 EMA on the 2-minute chart and confluence with the $16 resistance (now support).
Entry: Long on the pullback to the 9 EMA and $16, risking low of day.
Profit Target: Scalp trade, exiting near $17.50 after a failed push to $17.50 and a close below the 9 EMA.
Key Observation: The trade was dependent on the stock’s ability to hold above the $16 level.

3. MSOS (Marijuana ETF) - Afternoon Breakout

Catalyst: Washington Post article suggesting Trump would loosen federal restrictions on marijuana.

Strategy: Identifying a breakout after multiple failed attempts at resistance.

Trade (December 12th):

Setup: Resistance around $15.30, multiple failed attempts to break through. Higher lows forming throughout the day.
Trigger: Break of $15.30 in the afternoon, confirmed by the stock holding above that level.
Exit Strategy: Trailing stop loss using prior five-minute bar lows or the 9/21 EMA on the 2-minute chart.
Key Observation: Afternoon breakouts require a trailing stop loss due to typically lower momentum.

4. Tesla - Afternoon Breakout from Consolidation

Catalyst: Consolidation between $400 and $460 after a wedge breakout in September.

Strategy: Identifying a breakout after multiple failed attempts at resistance.

Trade (December 16th):

Setup: Gapped up over $460 and consolidated for two days, with resistance around $480. Multiple failed attempts to break $480.
Trigger: Break of $482 in the afternoon, confirmed by high volume.
Exit Strategy: Trailing stop loss using prior five-minute bar lows.
Key Observation: Buyers stepping up after multiple failed attempts, signaling a potential breakout during the "power hour."

2. Late Afternoon Momentum Trades - General Principles

Catalyst Dependent: Trades are driven by individual stock catalysts, not overall market trends.
Clear Resistance Levels: Identifying key resistance levels is crucial.
Multiple Failed Attempts: Look for stocks that have repeatedly tested resistance, with higher lows forming.
Volume Confirmation: Breakouts should be confirmed by increased volume.
Trailing Stop Losses: Essential for managing risk in afternoon trades due to lower momentum.

Conclusion

The presentation emphasizes the importance of identifying trades with clear, repeatable triggers based on specific price action patterns and catalysts. The speaker advocates for a disciplined approach, focusing on risk-reward ratio and utilizing trailing stop losses to protect profits. The examples demonstrate how to apply these principles in various market scenarios, including earnings plays, sector rotations, and consolidation breakouts. The ultimate goal is to become an "active trader" who consistently profits from well-defined setups, rather than relying on guesswork or speculation. The presentation concludes with a recruitment pitch for SMB Capital, highlighting their rigorous training program and opportunity to trade firm capital.