4 high beta technical analysis trade memo (sin)


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If you missed this Webinar with Mike Bellafiore, author of the “trading classic” One Good Trade, Mike discussed the breakout on a high-beta stock at an important technical level.


Mike also discussed:

How you can be more selective with your setups on high-beta stocks
Risk management
How to find important technical levels

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4 high beta technical analysis trade memo (sin)

  1. 1. High Beta Technical Setup(Breakout Above Important Technical Level) Memo AMZN 08/16/2012
  2. 2. 1. SMB TRAINING is NOT a Broker Dealer. SMB Training engages in trader education and training. SMB TRAINING offers a number of products and services, both electronical (over the internet through smbtraining.com) and in person. Through smbtraining.com, SMB TRAINING offers the “Virtual Trading Floor”, a community through which independent traders (subscribers), as well as T3 Trading Group, LLC traders, observe a virtual trading floor environment (as described below) for educational purposes. SMB TRAINING also offers web-based, interactive training courses on demand.2. T3 Trading Group, LLC is a Registered SEC Broker-Dealer and Member of the CBOE Stock Exchange (CBSX www.CBOE.com). All Trading conducted by SMB Training is done through T3 Trading Group, LLC.3. The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.4. This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.5. SMB Training and SMB Capital Management, LLC are separate but affiliated companies.6. No relevant positions7. Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.”
  3. 3. Big Picture• SPY opens unchanged and after a selloff on the open it starts trending higher for the rest of the day. The market is very strong and closes at 142.• This is basically a market trade using a high beta stock. Around 11 AM, SPY had put in its high and pulled back a little, very similar to the AMZN price action. As the market broke out to new highs, AMZN was set up very similarly embedding into a tight consolidation at the highs. The simultaneous breakout confirms the entry and makes it a very high probability setup/trade.
  4. 4. Market Trade Simultaneous breakout in SPY and AMZN Confirms trade
  5. 5. What are the important technical levels that would make you take this trade?-238.40 key breakoutlevel from earnings gapup-AMZN isnt a stockwhere you can just paythrough a longer termlevel without it showingyou something so waitfor an intraday level todevelop where you cancontrol your risk
  6. 6. System for scoring technical levels- Id rate the 10 day level of 538.40 as an 7.5 because it is formed from a catalyst and later found resistance at this level a second time, while it was ranging. As the price coils up below the level, the level gains importance as the breakout will be more powerful through it- Id rate the the intraday level of $539 as a 9 because it clearly showed itself as a big level where there was a lot of supply. Sellers kept stepping down and not letting the stock trade above that area. It also coincides to where the SPY stalled so a breakout in the SPY and AMZN would be setting up for a significant move
  7. 7. Multiple Time Frame Technical Analysis• Above an important longer term technical level• Above an important intraday technical level• Market getting ready to break an important technical level• Powerful combination here
  8. 8. High Beta Stocks• On a daily basis I have AAPL, AMZN, BIDU, LULU and NFLX on my watchlist.• If you pick your spots and put on the appropriate risk its not very difficult. The mental aspect of risking 50c on a trade is challenging but when you consider the Risk/Reward it makes it worth it.• Other High Beta stocks that are more challenging because of the higher price and spreads: GOOG, CMG, PCLN• Develop a list of High Beta stocks and track them daily for important technical levels
  9. 9. StockTwits 50 (stocktwits50.com)
  10. 10. Intraday Fundamentals• There was no news in AMZN yesterday• Strong market stock in a strong market breaking about of its range
  11. 11. Technical Analysis -Compression on the 30day chart in a 10 point range - Breakout of range with above avg volume
  12. 12. Reading the Tape-This was not a tape play. Focus was on the intraday breakout. The first time at the level therewasnt anything unusual about the tape but the second time it came back and it got throughthe highs, there were a lot of buyers just paying the offer and stepping up the bid.
  13. 13. Technical Analysis$ 239 Intraday inflexion point in AMZN
  14. 14. Trade Management - 1st attempt Stopped out Long 239.00 Stop 238.75
  15. 15. Trade Management - 2nd attempt Long 239 Stop 238.80
  16. 16. Trade ManagementTake sales into prev. highs get lighter on Stop out of Opportunity to rebuy on the remainder below the break of 241 the intraday hold of 241, Entry tight stop trend
  17. 17. Trade Review• I tried this trade the first time and got stopped out. The second trade was even a better opportunity because at that point the probability of it working out is much higher- as GMan always says.• If Im committing my time/capital to these trades, I cant take the first setup and miss the second. The second trade was a layup trade.• Too many new and developing traders miss the easier trade because they got stopped out on the first.• Trade the trade not your emotions.• Do the right thing. Great example here.