IO DAY TRADE SETUP – BULL FLAG FOR -1 : 1 LOSS

ION Geophysical Corporation (IO) announced yesterday its Q1 earnings at $0.33 per share. This beat a Zacks estimate that the company would lose $0.93 per share. Its stock price rose sharply at the opening minute, then formed a bull flag. It broke briefly out of consolidation, but unfortunately the breakout was not sustained and resulted in a loss for me. See my analysis below.

IO - Losing Day Trade Setup - Bull Flag - 05-07-2020

ACCOUNT OF EVENTS

The markets opened with an upward bias, with the Dow at +1.09 percent when I checked at 6:30 AM PT.

CNBC’s main headline read “Dow jumps 300 points as investors bet on an economic rebound from the depths of the pandemic.” There was nothing fundamental in this headline that I felt could give me an edge. But I did see that oil was up 10 percent on a delayed quote, so I took note of that.

The list of the morning’s top gainers on Finviz showed stocks from several different industries, but IO, #1 spot holder, got my attention the most. It was up over 125 percent and traded over 4 million shares, great volume. Seeing previously that oil was up so high, I checked the news on it and saw the earnings beat. I was fairly confident that IO  would be a good play. The pre-market chart looked great as well, as the stock was above the VWAP and testing $3.50.

TTPH held the #2 spot also looked interesting to me, as biotechnology stocks always do. It was up 46 percent and traded over 800,000 shares, good volume. But it looked thinly traded on the chart and it was below the VWAP. It also was up on news that La Jolla Pharmaceutical (LJPC) made an offer to buy the company. In my experience, news of acquisitions tends not to be a great catalyst. So, I skipped it. But I will touch more on this later, as TTPH would have been the better choice.

IO - Losing Day Trade Setup - Finviz 6:30 AM PT - 05-07-2020

Out the gates, IO made a sharp rise and strong close, hitting a high of $4.10 and closing at $3.91. If I had entered a buy stop market order at $3.51 before the market opened, I would have walked away with a profit. But I’ve been burned a few times when trying to trade out the gates, so I need more data and experience before making these plays.

At 6:34 AM PT IO reached $4.29 before pulling back. Seeing that there was support around $3.80, I decided to put in a buy stop market order at $4.31, with an intended stop loss at $3.79.

IO consolidated and indeed held the $3.80 support. At 6:42 AM PT it broke out of consolidation, hitting a high of $4.36. Unfortunately, it did not push any higher and it hit my intended stop loss at 6:47 AM PT.

To make matters worse, I forgot to put my stop loss in. In a last ditch effort, I placed an OCO (Order Cancels Order) order with a stop loss at $3.49 and target at $3.79, so I can at least maintain just a loss ratio of 1 to 1. But the price quickly hit $3.49 at 6:50 AM PT.

This was a huge disappointment, as “all the boxes” were checked to make this a great looking setup. I have a feeling that I’ve seen IO disappoint in the past, but I don’t have any trade confirmations for it nor do I have data. Nonetheless, I will certainly log this in my data tracker and take note that IO may be one of those stocks that I need to avoid, at least for any setup that is not an opening breakout.

However, I will also log the winning setup that I missed at the opening minute. Perhaps when I gain more confidence, as well as a speedier broker I will trade this type of setup.

Unfortunately I misjudged the news on Tetraphase Pharmaceuticals Inc (TTPH), and should have noticed some slight differences from the acquisition news that I am use to seeing. First, it was merely an offer to acquire the company, not a finalized deal. Second, there was no price per share disclosed. Usually, acquisition news would include this piece of information and the stock usually already trades at this price in the pre-market. Third, apparently Tetraphase was already in talks with AcelRX (ACRX) to be acquired, so La Jolla essentially created a bidding a war, which turned out be be a powerful catalyst.

NOTABLE DATA POINTS

Date: 05-07-2020

Day of week: Thursday

Approximate market performance at open: Dow 1.09%, S&P 500 1.28%, Nasdaq 0.00%

Company name: ION Geophysical Corporation

Symbol: IO

Industry: Oil & Gas Equipment & Services

Recent news date: 05-06-2020

Recent news headline: Ion Geophysical (IO) Tops Q1 Earnings and Revenue Estimates

Approximate performance before buy signal: +145.21%

Approximate volume before buy signal: 11,436,589

Float: 10.77 million shares

Setup: Bull Flag

Buy signal time: 6:38 AM PT

Entry time: 6:42 AM PT

Stop loss time: 6:50 AM PT

Entry wait time: 2 minutes

Stop loss wait time: 8 minutes

Order type: buy stop market

Entry price: $4.31

Stop loss price: $3.79

Maximum exit price: $4.35

Loss ratio: -1 to 1

Did I trade this setup? Yes

VXRT DAY TRADE SETUP – BULL FLAG FOR 1.14 : 1 MAX GAIN RATIO

Vaxart, Inc.’s stock (VXRT) broke out of a bull flag pattern within the first half hour of trading today. The move came after news coverage mentioned that the company was in the preclinical stages for a coronavirus vaccine. While the breakout was not a powerful one, it did provide an opportunity for traders to receive a maximum gain-loss ratio of 1.14 to 1. See my analysis below.

VXRT - Winning Day Trade Setup - Bull Flag - 04-27-2020

ACCOUNT OF EVENTS

The setup occurred on Monday, April 27, 2020.

As the trading day opened I checked the major indices to get a feel for how the markets were performing. They were all up, with the Dow jones at +.54%. A headline on CNBC read “Dow futures rise more than 250 points as NY, other states start to make plans for reopening.” Overall, I felt there was an upward bias.

I checked Finviz for the morning’s list of top performing stocks. There were a handful of interesting choices, each with positive news that could potentially serve as a catalyst for a strong move up.

Unfortunately, all the stocks on my short list quickly sold off within the first few minutes of the, so I wiped the list clean. I refreshed my browser’s view on Finviz at 6:35 AM PT and I saw that VXRT, previously nowhere to be found amidst the top gainers, at the number six spot. It was up around 19% with over 2.5 million shares traded.

I checked the news section on my trading platform for any news on the stock, and saw the headline “Six Coronavirus Vaccines Under Clinical Trials, WHO Says.” The article was specific to the company, but it mentioned briefly that Vaxart, Inc. was in the preclinical stages for a coronavirus vaccine. Given the current situation, I felt it was a strong enough catalyst to enter a trade if the setup was there.

I checked the chart and indeed the stock made a strong move up, hitting a high of day of $3.75 at 6:35 AM PT.

At 6:38 AM PT, VXRT tested $3.80, then start pulling back, touching $3.63 for that minute’s low. I had a feeling that support would be at $3.60 so I put in a buy stop market order at $3.81 with an intended stop loss at $3.59.

Between 6:41 AM PT and 6:47 AM PT it indeed tested $3.60. I wanted to shoot for a 2 to 1 gain-loss ratio so I went to my open order and added my stop loss at $3.59 and limit at $4.25 [ (($3.81 – $3.59) x 2) + $3.81 ] with an OCO (Order Cancels Order) condition.

at 6:49 AM PT, VXRT broke above $3.80, filling my buy order. It continued its move up, testing $4.00 at 6:55 AM PT. I like to place my stops at my breakeven point once a stock reaches a 1 to 1 gain-loss ratio. In this case, that level was $4.03, but since it was so close the whole dollar level I moved my stop earlier than usual.

Unfortunately the stock could not push higher than $4.07. It peaked out at 6:56 AM PT, then hit my stop loss at 7:00 AM PT.

While I am disappointed that the stock did not reach my target, I am overall content with how the trade was read and managed. I followed my rules in validating and entering the setup, as well as trailing my stop losses.

As this setup had a maximum potential gain-loss ratio of at least 1 to 1, I am logging it in my data tracker as a winning setup, even though the way I traded it did not result in a profit for me.

NOTABLE DATA POINTS

Date: 04-27-2020

Day of week: Monday

Approximate market performance at open: Dow +0.54%, S&P 500 +0.75%, Nasdaq +0.91%

Company name: Vaxart, Inc.

Symbol: VXRT

Sector: Biotechnology

Recent news date: 04-24-2020

Recent news headline: Six Coronavirus Vaccines Under Clinical Trials, WHO Says

Approximate performance before buy signal: +19.87%

Approximate volume before buy signal: 2,541,756

Float: 67.20 million shares

Setup: Bull Flag

Buy signal time: 6:39 AM PT

Entry time: 6:49 AM PT

Maximum exit time: 6:56 AM PT

Entry wait time: 10 minutes

Exit wait time: 7 minutes

Order type: stop market buy

Entry price: $3.81

Stop loss price: $3.59

Maximum exit price: $4.06

Maximum gain-loss ratio: 1.14 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