Sometimes, when stocks have a catalyst, the price action completely reverses on day 2. This happened to NKE and it provided some strong technical trades of important levels. I didn't trade them but I used a market structure drill to analyze the misses trades.

1. D2 Earnings Reversal
Catalyst: Earnings beat
Setup: D1 Reversal
Trades: Reclaim of support & Failure of resistance. Technical trades
Ticker: NKE
Date: 22-12-22

2. Bigger picture: SPY After retracing over 7.5% in five
days SPY has bounced and made a
lower low.
Market breadth isn’t extremely
negative yet. But it’s clearly not as
strong as the cycle we started with
the first positive CPI print on 10
November.
Today SPY gapped down, broke
down during the open and broke
down even more on elevated
volume. Price started to
consolidate above last month’s low,
378 level, and povided a strong
break down opportunity.
SPY completely reversed in the
afternoon.

3. Bigger picture: VIX
The volatility has decreased a lot
since the beginning of October.
But we are still trading above 20
which means this is a market with
high volatility and traders should
lean more towards market plays
than stocks in play.

4. Earnings
Fundamentals
Float: 1240 million.
Institutional Ownership: 82,9%
Short %: 1,3%.
ATR: 4,19.
Average Daily volume (50 day): 8 million
Gap: -1,23% / 0,35 ATR
Expected Earnings: $0,65 EPS & 12,54 billion REV
Reported Earnings: $0,85 & 13,32 billion REV
Earnings beat: 30% EPS , 6,2% REV

5. Past Earnings: Last 5 days closed red.

6. Levels of interest: HTF & D1
S&R levels.
-114 support area, HTF
level, 7/10.
-116,50 resistance
area, HTF & D1 level,
8,5/10.
-118,50, HTF resistance
level and also HOD1.
8/10.

7. Fails to hold R1, then holds VWAP and reclaims.
A) Describe market structure.
- We made almost 0.35ATR move from the LOD.
-Price holds well above S1, doesn’t come near it.
-EMA’s start of bullish, then we trade down VWAP and crossover. When we
can’t trade down VWAP the 9EMA overtakes the 20EMA again. Looks bullish.
-Price action started off very choppy the first 15m, but then the candles starting
to be come cleaner. After the consolidation we trade through R1 after 5
consecutive green candles with higher highs and lows.
-Selling volume increases after the first lower high, but then we can’t trade low.
After price reclaims R1 we show some significant buying volume.
-We’re currently trading away from VWAP, after we failed to test LOD/S1.
B) Project forward a path.
- I though that price would be weak today. But the fact that we didn’t test S1
after we failed of R1 and then reclaimed R1 tells me that we might be stronger
than expected.
-Given all the variables, I think the most likely path is a move towards R2. I
would assign a 50% probability to it.
C) Call out potential trade.
The most likely scenario is a move upwards. Therefore, I want to be long
towards 116,50. I would assign a high probability for a hold and continuation
above this level.
The range is about 1 dollar. I would like to see a clean bounce of the 9EMA or
20EMA. I want to enter on a strong bid near those EMA’s. If I miss the entry I
could still try to get in as high at 115,75, which gives me a 3 to 1 RR. Given a
50% probability this would be a profitable trade.

8. Assess decisions and expectations.
D) Assess expectations.
-Given that we couldn’t bounce of the
9EMA, the ideal entry would probably
have been a later entry at 115,75.
-Price action is strong, and it doesn’t
bounce of the 9EMA.
Stop should be below 115,50.
- Since I entered when the stock didn’t
even bounce of the 9EMA, a trailing
stop along the 9EMA should make
sense.
- The best exit would be for a 1m LL
once we reached 116,40. We are
extended of the 9EMA and the risk for
a fail of this level is too great. The
extension of the 9EMA followed by
that large red candle would be the
reason to go flat.

9. Technical Analysis: Fail of R2
A) Describe market structure
-From LOD price made about 0.5ATR move.
-We failed to hold 116,50, which is an 8.5/10 HTF importance level. Can’t hold above for more then 10
minutes.
-The 9 and 20 EMA are about to crossover. This is bearish.
-Significant is the change of character in price action. We’re trending up nice and slowly, and then we
flushed down support making low after low.
-Biggest CHOCH is the way we failed support. The failure almost couldn’t have been more obvious. If
there was only heavy volume.
B) Project forward a path.
-Overall thesis hasn’t changed. We tested 116,50 but failed as was the most likely. Don’t think will
reclaim.
-I would give a very high probability for a continuation lower. Most likely that will be to VWAP or
perhaps 115,60-115,70 area which was intraday support. I would assign 70% to this path.
-Reclaiming 116,50 is very unlikely , probably 10%.
- I also don’t see it consolidating here, just below resistance. 20% chance. If it does, then the probability
of a reclaim of R1 becomes much higher.
C) Call out potential trade.
-Technical trade, fail of HTF resistance. 8,5 level.
-Most important level would be VWAP, that probably would be the same area as intraday support.
-I don’t see it breaking VWAP with also important support at 115,46 below it. I wouldn’t assign a high
probability do that. I will most likely hold (60-70%). Therefore, a move2move trade makes sense where I
would sell the most at VWAP (75%) and then look for the partial to sell a bit lower when bids are
stepping up.
-The risk reward makes sense. From the current low there’s about 50 cents reward. I will enter on a
bounce so this will add even more reward. The best scenario would be a bounce towards R1 area and a
clear fail. With a stop above I would have the best RR.

10. Technical Analysis
D) Assess expectations.
-Ideal entry point was close to R1 after
there was no volume being done
reclaiming the 20EMA.
- Best stop would have been above R1.
-Optimal trade strategy was to enter
between 116,38-116,47 and to add at
another tier at 116 for a clean bounce
of the 9EMA and place your stop above
this high. This was a clean pull in on low
volume.
I would have sold most into VWAP and
got flat for a close above the 9EMA.

11. What could I have done better?
“Just like D2 gap down on NKE, I don’t have a strong gameplan in terms of setups. I have little experience in
these short setups. Nor do I have clear inflection areas on NKE, that’s because we already are below LOD1
and the important HTF level.”
Gameplan was not professional at all. Didn’t recap the important levels. I thought because I don’t have short
playbook setups, I shouldn’t prepare in detail.
I wasn’t prepared for a potential reversal and the trade opportunities that it might bring. Stocks in play with
strong important levels will often provide good opportunities around these levels. I must prepare this. They
eventually will always playout a little bit different then expected, but this is where I should be aligned with
the market and adapt.