CHK DAY TRADE SETUP – VWAP BOUNCE, STOP AND GO FOR 3.6 : 1 MAX GAIN RATIO

Chesapeake Energy Corporation’s stock (CHK) has been rallying for the past few days, coinciding with the current rebound of oil prices. This morning, it made a strong bounce off the VWAP that provided traders with a maximum gain-loss ratio of 3.6 to 1. See my analysis below.

CHK - Winning Day Trade Setup - VWAP Bounce, Stop and Go - 04-24-2020

ACCOUNT OF EVENTS

The setup occurred on Friday, April 24, 2020.

At 6:30 AM PT I checked overall market performance and saw that there was positive bias, with the Dow Jones Industrial average up around 0.77 percent.

Next I went over to CNBC for any news that could have help me in today’s trading decisions. The headline read “Dow futures jump 150 points as oil continues rebound from historic lows.” With that in mind, I was hoping to see see some oil stocks in the morning’s top gainers.

Sure enough, I see CHK in the top five list on Finviz, up 26 percent with over 300,000 shares traded. I placed particular interest on this stock not only because of the positive news surrounding oil prices, but it was also a top performer yesterday, during which I was able to capitalize on in the late morning. It has been my personal experience that a stock that is on the radar for a second consecutive day usually provides opportunities for additional gains before it fades.

I checked for recent news specific to CHK. A negative sounding headline registered yesterday afternoon. It read “Chesapeake Adopts Poison Pill After Shares Drop on Oil Rout.” Given how the stock had been performing well recently, I open the article to obtain more details and see if I was entering into a bad trade. The article stated that the company took actions to “thwart any takeover attempts.” This can actually be positive news for some shareholders. The ambiguity of the news, lead me to place more weight on the general news regarding the oil price rebound.

The stock did a short bounce off the VWAP during the first few minutes of trading but quickly sold off a bit below it by 6:49 AM PT. but it reversed off this low just as quickly and closed back above the VWAP by 6:54 AM PT. Not completely convinced that the upward movement would continue, I decided to let the setup develop a little more.

I didn’t have to wait long. CHK tested the VWAP for 2 minutes before making a strong push up, touching $37.00 at 6:57 AM PT. It then pulled back during the next minute, testing $36.00. Seeing these resistance and support levels at the whole dollar levels, I quickly put in a buy stop market order at $37.01, with an intended stop loss at $35.99. I went for a 2:1 gain-loss ratio and calculated my target limit at $39.05 [ (($37.01 – $35.99) x 2) + $37.01) ].

At 7:00 AM PT the stock made a strong break above $37.00, filling my order. I quickly went to my open position and added my stop loss and limit levels with an OCO (Order Cancels Order) condition.

CHK continued the upward move with little hindrance, reaching my target at 7:07 AM PT and topping out at $40.69 by 7:09 AM PT.

NOTABLE DATA POINTS

Date: 04-24-2020

Day of week: Friday

Approximate market performance at open: Dow +0.77%, S&P 500 +0.67%, Nasdaq +0.48%

Company name: Chesapeake Energy Corporation

Symbol: CHK

Sector: Independent Oil and Gas

Recent news date: 04-23-2020

Recent news headline: Chesapeake Adopts Poison Pill After Shares Drop on Oil Rout

Approximate performance before buy signal: +27.43%

Approximate volume before buy signal: 1,471,358

Float: 8.86 million shares

Setup: VWAP bounce, stop and go

Buy signal time: 6:58 AM PT

Entry time: 7:00 AM PT

Maximum exit time: 7:09 AM PT

Entry wait time: 2 minutes

Exit wait time: 9 minutes

Order type: stop market buy

Entry price: $37.01

Stop loss price: $35.99

Maximum exit price: $40.68

Maximum gain-loss ratio: 3.6 to 1

Did I trade this setup? Yes

 

CHK DAY TRADE SETUP – VWAP BREAKOUT AND BULL FLAG FOR 3.83 : 1 MAX GAIN RATIO

Chesapeake Energy Corporation’s stock (CHK) made some large swings today, flying high during the first two hours, selling off violently far below the VWAP, then making an upward grind through mid morning. A late morning powerful breakout above the VWAP, and a mild break above a bull flag consolidation provided an excellent opportunity to make a potential 3.83 to 1 gain-loss ratio.  See my analysis below.

CHK - Winning Day Trade Setup - VWAP Breakout and Bull Flag - 04-23-2020

ACCOUNT OF EVENTS

The setup occurred on Thursday, April 23, 2020.

The markets at large experienced high volatility. It’s days like this that I get especially excited about trading during late morning, as I can usually find stocks making powerful breakouts.

In particular, I’ve been noticing lately that VWAP breakouts often occur during the 11 o’clock AM hour PT.

At 10:59 AM PT I took a look at CNBC to get a quick snapshot of general market conditions and any news headlines that may influence my trading decisions.

Indeed, the news outlet acknowledged the high volatility today, with overall market performance being flat. A headline at the time read “S&P 500 turns negative In volatile session as investors evaluate Gilead virus treatment, oil rebound.”

Then I checked Finviz for the day’s top gainers. CHK was on the list. Finviz has it categorized in the Independent Oil and Gas sector. In the past I have seen stocks in this sector surge up when a positive news headline regarding comes out. In addition, while there was no specific news on the company for the day, there was negative news that came out last week regarding the company halting its dividend. I’ve been noticing that this bad news then good news sequence often results marked upward swing rise of a company’s stock price.

I examined CHK’s chart. It had been on an hour long upswing, recovering from a sell off and nearing the VWAP, which was at $26.07. I waited for the stock to pull back and consolidate before committing to a buy order.

The stock hit $25.99 at 11:05 AM PT. It persisted at this level for several minutes, then pulled back between 11:11 AM and 11:12 AM PT it tested support at $25.50. This confirmed my buy decision and I put in a buy stop market order at $26.11 with a stop loss at $25.49. Since I wanted a quick win I wanted to go for a 1 to 1 gain-loss ratio, I calculated my target limit order to be $26.73 [ ($26.11 – $25.49) + $26.11 ]. I added my stop loss and limit prices to my existing order by adding an OCO (Order Cancels Order) condition. That way, my risk and reward would be automatically managed when my buy stop order got filled.

CHK traded in a narrow range for several more minutes before breaking above the VWAP and hitting my buy stop price at 11:28 AM PT. It quickly hit my target and I was out by 11:32 AM PT. It continued upward, peaking out at $28.48 at 11:45 AM PT.

While I am happy that I made a winning trade, a part of me is kicking myself for not seeking a greater gain. I’ve read countless times that day traders should seek at least a 2 to 1 gain-loss ratio if we are to have long term success. I suppose it was fear of missing out that got the better of me. I will surely work on resolving this.

NOTABLE DATA POINTS

Date: 04-23-2020

Day of week: Thursday

Approximate market performance at 11:00 AM PT: Dow +0.38%, S&P 500 +0.14%, Nasdaq +0.03%

Company name: Chesapeake Energy Corporation

Symbol: CHK

Sector: Home Furnishings and Fixtures

Recent news date: 04-17-2020

Recent news headline: Struggling Chesapeake Energy halts dividend

Approximate performance before buy signal: +28.79%

Approximate volume before buy signal: 5,520,759

Float: 8.86 million shares

Setup: VWAP breakout and bull flag

Buy signal time: 11:11 AM PT

Entry time: 11:28 AM PT

Maximum exit time: 11:45 AM PT

Entry wait time: 21 minutes

Exit wait time: 17 minutes

Order type: stop market buy

Entry price: $26.11

Stop loss price: $25.49

Maximum exit price: $28.48

Maximum gain-loss ratio: 3.83 to 1

Did I trade this setup? Yes

 

SNBR DAY TRADE SETUP – VWAP BREAKOUT AND BULL FLAG FOR 3.62 : 1 MAX GAIN RATIO

Sleep Number (SNBR) recently announced its Q1 earnings that beat estimates, after which its stock price opened 24 percent higher than yesterday’s close. During the last 15 minutes of the first hour of trading, SNBR broke out above the VWAP, formed a bull flag consolidation pattern and broke out a second time. The move peaked during the second hour of trading, yielding a maximum gain-loss ratio of 3.62 to 1. I’ve been sitting on the sidelines observing price action lately, but I did trade this stock. Although I was correct in anticipating the bull flag breakout, and even though I set my stops and limits appropriately, I ended up taking a slight loss of $0.42 due to slippage. Nevertheless, the setup itself is a winner and it is going into my data tracking log. See my analysis below.

SNBR - Winning Day Trade Setup - VWAP Breakout and Bull Flag - 04-23-2020

ACCOUNT OF EVENTS

The setup occurred on Thursday, April 23, 2020.

At market open I checked Finviz and browsed the list of top gainers for potential stocks to trade. SNBR was on the list but it wasn’t my immediate choice as it had only around 145,000 shares of volume and it was already trading below the VWAP. So, I moved on to other stocks that looked like they would offer better trading opportunities.

But my top choices turned out to be duds, giving false breakouts or falling immediately below the VWAP. I had a feeling this would happen as the markets were quite flat this morning.

I decided to wait for the markets to open up a little before making a trading decision, monitoring Finviz every five minutes.

I’ve narrowed my focus to trading only during the first hour, with some exception. At 7:19 AM PT I do a final check on Finviz and see how the charts look on the top gainers and I saw that SNBR made a strong breakout above the VWAP. It was up around 28 percent and traded over 1 million shares of volume. I decided to monitor it and ignore all other stocks.

At 7:20 AM PT it made another strong move toward $29.00, stopping right at $28.91. At 7:21 AM PT it touched $28.99 before heading lower.

It looked like a Stop and Go setup, so I quickly entered a buy stop market order at $29.01 with an intended stop loss order at $28.49 if the stock made a breakout. With this type of setup there’s no consolidation to accurately determine a stop loss level so I find that placing a stop loss order $.01 below a $1.00 or $0.50 is the next best thing.

The stock didn’t break out for a few minutes, but it maintained support above $28.50 so I added an Order Cancels Order (OCO) order condition. This means that if the price reaches $29.01 and my buy stop order gets filled, my broker would automatically put in a limit order and stop loss order, and when one of those orders gets filled, the other gets canceled. On this trade, I decided to go for a  quick win at a 1 to 1 gain-loss ratio, setting my limit order to $29.53 and my stop loss to $28.49.

At 7:27 AM PT SNBR broke above $29.00, filling my buy stop order. Unfortunately, because the price moved so fast and my order was a market order, I got filled at $30.06. Since my limit order was $29.53, my broker faithfully sold my position at a higher price, but at $30.05.

For those of us who use conventional brokerage firms, also known as full service brokerage firms, occasional major slippage due to slow order fulfillment is a reality we must face. This is due to these firms routing orders through middlemen, which can take several seconds to fulfill. I suppose I shouldn’t expect speedy execution from a broker that doesn’t charge any trading commissions.

Ideally, I would use a direct access broker, which would send orders directly to the stock exchanges and take only a fraction of a second to fulfill. But these types of brokers charge trading commissions. Since I am just learning how to day trade and my trades are small, I will stick with my current broker for now.

NOTABLE DATA POINTS

Date: 04-23-2020

Day of week: Thursday

Approximate market performance at open: Dow +0.45%, S&P 500 +0.49%, Nasdaq +0.41%

Company name: Sleep Number Corporation

Symbol: SNBR

Sector: Home Furnishings and Fixtures

Recent news date: 04-22-2020

Recent news headline: Sleep Number (SNBR) Q1 Earnings and Revenues Beat Estimates

Approximate performance before buy signal: +22.40%

Approximate volume before buy signal: 1,051,893

Float: 26.38 million shares

Setup: VWAP breakout and bull flag

Buy signal time: 7:22 AM PT

Entry time: 7:27 AM PT

Maximum exit time: 7:44 AM PT

Entry wait time: 5 minutes

Exit wait time: 17 minutes

Order type: stop market buy

Entry price: $29.01

Stop loss price: $28.49

Maximum exit price: $30.89

Maximum gain-loss ratio: 3.62 to 1

Did I trade this setup? Yes

 

SFET DAY TRADE SETUP – BULL FLAG AND VWAP BOUNCE FOR 1.18 : 1 MAX GAIN RATIO

Safe-T Group Ltd (SFET) announced that it expects revenue growth of 146% to 169% during the first quarter of 2020. Its stock price opened at more than 37 percent higher than its previous day close. Within the first hour of trading it made a bull flag and bounce off the VWAP. It didn’t provide the 2 to 1 gain-loss ratio that is commonly looked for by day traders, but the setup was clean. I missed the trade because I hesitated due to usually seeing this setup later in the day, but I will put this in my data tracking log. See my analysis below.

SFET - Winning Day Trade Setup - Bull Flag and VWAP Bounce - 04-20-2020

ACCOUNT OF EVENTS

The setup occurred on Monday, April 20, 2020.

I checked Finviz.com when the market opened and saw that SFET was up around 36 percent. I noticed that a news headline was made earlier today mentioning that the company announced estimated revenue growth, so I put it in my shortlist to watch.

But the stock quickly sold off far below the VWAP. I usually look for stocks that are bull flagging above the VWAP during the first few minutes of the day, so I stop watching it closely.

Then, SFET made a break above the VWAP between 7:02 AM and 7:03 AM PT with a noticeable increase in trading volume. I am not use to seeing this so early in the trading day so I wasn’t confident in the setup, but I would soon find out that my hesitation would end up costing me…..

It pulled back near the VWAP between 7:04 AM and 7:05 AM PT, forming two red candlesticks in a row.

A green candlestick formed at 7:06 AM PT and remained within a fairly tight range between the VWAP and recent high. This would be a signal to start entering an order in my trading platform.

The most recent high was made at 7:03 AM PT at $2.14. Since the price had not yet broken out above this level, I would put in a buy stop market order at $2.16.

The VWAP was $2.01 when the green candlestick formed at the pullback, so I would place my stop loss market order at $1.99.

The difference between the entry and stop prices is $0.17. So, if I was looking for a 2-to-1 gain-loss ratio, I would place a limit order at $2.50, that’s $0.34 above the entry price of $2.16.

Unfortunately, the price never reached $2.50. It reached $2.37 at 7:13 AM PT before it started a downward slide that lasted through the trading session.

I like to move my stop loss to the break even point once price reaches a 1 to 1 gain-loss ratio level, $2.33 in this case. So, realistically speaking I would have been stopped out once price dropped back down to $2.16 at 7:17 AM PT.

However, if I was looking for a 1 to 1 gain-loss ratio, this would be a winning setup. Assuming a target of $.01 below the highest point of the move, the exit price would be $2.36. This would provide a maximum potential gain-loss ratio of 1.18 to 1.

I don’t have enough experience or data to know if seeking a 1 to 1 gain-loss ratio is more profitable for this particular stock, using this particular setup at this particular timeframe, so for the foreseeable future I am logging setups that provide at least a 1 to 1 gain-loss ratio.

NOTABLE DATA POINTS

Date 04-20-2020

Day of week: Monday

Approximate market performance at open: Dow -2.12%, S&P 500 -1.91%, Nasdaq -0.95%

Company name: Safe-T Group Ltd

Symbol: SFET

Sector: Application Software

Recent news date: 04-20-2020

Recent news headline: Safe-T Group Ltd. Estimates 146%-169% Growth in Revenue for the First Quarter of 2020

Approximate performance before buy signal: +38.51%

Approximate volume before buy signal: 3,823,883

Float: 1.80 million shares

Setup: bull flag and VWAP bounce

Buy signal time: 7:06 AM PT

Entry time: 7:08 AM PT

Maximum exit time: 7:13 AM PT

Entry wait time: 2 minutes

Exit wait time: 5 minutes

Order type: stop market buy

Entry price: $2.16

Stop loss price: $1.99

Maximum exit price: $2.36

Maximum gain-loss ratio: 1.18 to 1

Did I trade this setup? No