Highlighted Trades - 06/11/2024
We had our first short-heavy day in a while. Of the 41 trades we saw today, 12 were long and 31 were short. These occurred across 32 tickers. Let’s check them out.
Today’s big winner was BWA. We made a solid 0.44% off of 1 entry here. I think that our entry conditions on our entry candle are pretty strong, but by the following candle they’re fantastic. Momentum and MACD are strong and consistent going in, but my main critique of our entry is that the cross is relatively weak at first. This is mitigated quickly afterwards, because for the next half dozen candles, both TK-lines slope down sharply and consistently. I also agree with our exit. We don’t get stopped out as soon as price action starts to hit the Tenkan-Sen line, but we get out right before it definitively crosses above it. Overall, this was a really strong trade. All of our conditions aligned, with very few red flags. There were few reasons not to take this one.
Switching gears, our biggest loser today was WDC, losing 0.45% between 2 entries. Our second entry was mostly in the black, so I’ll be focusing on that first entry here. There are a few red flags here that I think merit some discussion. First, the Kijun-Sen line is completely flat, warning that we might be looking at stagnation, or worse - a reversal. Secondly, we want both TK lines to slope in the direction of our trade (ideally), but if you look closely, you can see a warning sign that the Kijun-Sen line is about to move upwards. The Kijun-Sen line is calculated using the 26-period high and low values, but at the time of entry, the stock price is firmly in between these - nowhere near establishing a new high or low price. And, since the low price was observed 24 candles prior, we have a warning that, unless the stock price establishes a new low immediately, the Kijun-Sen line will being increasing in just 2 candles - which is exactly what happened. The only way this trade really makes sense is if you’re betting on WDC establishing a new low of day shortly after the entry, and while momentum is strong, I think the fact that the entry signal happens on a green candle makes that a really hard bet to make.
This was a flawed trade, but only if you really knew what to look for. If you saw the momentum, cross, and MACD and felt this was a winning trade, I completely understand. It goes to show that, as traders, it’s important that we always be learning and trying to improve. The devil is often in the details here.
The last trade I’d like to discuss is this long on CPB, because it succeeded where our WDC trade failed. Similarly to our entry on WDC, the 26 period high was seen 25 candles prior to our entry, meaning that the Kijun-Sen line would decline shortly unless the stock made new daily highs quickly after our entry. This time, however, CPB broke its daily high and brought the Kijun-Sen line upwards with it. In my opinion, the biggest difference here is momentum - not with a series of large green candles - but very consistent, small green candles. Where WDC had shown bearish movements at an erratic rate, CPB shows 30 minutes of nearly constant upwards movement. This is still a somewhat high-risk high-reward trade, since we’re betting on the stock breaking 2 previously established resistance levels, but with a strong cross and consistent momentum, this is exactly the kind of chart pattern that could break those levels. If you’re betting on a breakout play, it pays to look closely at the nuances of the chart’s momentum.
That’s all I have for you tonight. As always, thank you for reading and happy trading!
