MRAM DAY TRADE SETUP – STOP AND GO FOR 2.41 : 1 MAX REWARD RATIO

Everspin Technologies, Inc (MRAM) announced earnings yesterday, beating expectations on both EPS (earnings per share) and revenue. Its stock price rose sharply during the first 15 minutes of trading today. The Stop and Go trade setup presented a 2.41 to 1 reward risk ratio. See my analysis below.

MRAM - Winning Day Trade Setup - Stop and Go - 05-08-2020

ACCOUNT OF EVENTS

The markets had a bullish open, with the Dow at +1.36 percent when I checked at 6:30 AM PT.

CNBC’s main headline read “Dow futures up 200 points even after record job losses as investors bet the worst has passed.” Although this did not give me any clues for a sector play, I concluded that perhaps investor and trader confidence was high.

The list of the morning’s top gainers on Finviz showed a bit of interesting choices.

PAR held the #1 spot. I usually skip over the top gainer if it has low volume by market open, but I checked its chart and news this time. It looked too thinly traded and choppy to me. It also failed to close above its VWAP. Yesterday, it had a revenue beat, but it also had an earnings miss, so I moved.

VUZI held the #2 spot. I had considerably more interest in it as it had great volume. I also saw it in the top gainers yesterday. Positive news regarding increasing popularity of its smart glasses in the healthcare industry was a possible catalyst for a good trade.

PVAC held the #3 spot. The good plays I’ve made in oil and gas so far were from the Independent Oil and Gas industry. This, plus the fact that the company announced a revenue miss yesterday caused me to skip it.

MRAM - Winning Day Trade Setup - Finviz 6:30 AM PT - 05-08-2020

Other stocks that interested me included CWH, PSTI and FBIO.

I’ve seen CWH present some good setups that I’ve missed in the past, but it announced an earnings miss yesterday so I skipped it as well. It would, however, end up making a decent move that I’ve logged in my data tracker.

I’ve seen PSTI a number of times in the top gainers. It had positive news regarding the start of phase 2 of a study it was conducting. I have, in fact, traded successfully on this type of news. Unfortunately I did not like how the chart looked at the time so I skipped it. It ended up making a nice move during the last half of the first hour, but by that time I had finished trading.

FBIO had some positive news regarding a license deal, but it was trading well below the VWAP already, so I skipped it.

After seeing a bull flag form on VUZI, I placed a buy stop market order, but when I refreshed my view of Finviz at 6:35 AM PT I saw that MRAM had come out of nowhere and shot up to the #2 spot.

MRAM - Winning Day Trade Setup - Finviz 6:35 AM PT - 05-08-2020

I checked the news and saw the earnings and revenue beats.

By the time I checked its chart (6:38 AM PT) it had already started pulling back after making a strong run up and testing $4.70. It looked like the familiar Stop and Go pattern that is quickly becoming one of my favorites.

I canceled my order on VUZI and put in a buy stop market order on MRAM at $4.71. My intended stop loss was at $4.49. I was going for a 2 to 1 reward-risk ratio so my intended target was $5.15 [ (($4.71 – $4.49) x 2) + $4.71 ].

At 6:40 AM PT MRAM pushed higher and my order was filled. I quickly added my stop loss and limit orders with an OCO (Order Cancels Order) condition.

At 6:41 AM PT MRAM hit a high of $5.06. I moved my stop loss to break even since the stock reached my 1 to 1 reward-risk ratio price of $4.93 [ ($4.71 – $4.49) + $4.71 ].

At 6:42 AM PT MRAM hit a high of exactly $5.15 and my target limit order was filled.

A very quick and successful trade. I wish all of them were like these.

NOTABLE DATA POINTS

Date: 05-08-2020

Day of week: Friday

Approximate market performance at open: Dow +1.36%, S&P 500 +1.13%, Nasdaq 0.00%

Company name: Everspin Technologies, Inc.

Symbol: MRAM

Industry: Semiconductors

Recent news date: 05-07-2020

Recent news headline: Everspin Technologies Q1 Adj. EPS $(0.050) Beats $(0.080) Estimate, Sales $10.100M Beat $9.600M Estimate

Approximate performance before buy signal: +32.81%

Approximate volume before buy signal: 61,338

Float: 17.43 million shares

Setup: Stop and Go

Buy signal time: 6:38 AM PT

Entry time: 6:40 AM PT

Maximum exit time: 6:43 AM PT

Entry wait time: 2 minutes

Maximum exit wait time: 3 minutes

Order type: buy stop market

Entry price: $4.71

Stop loss price: $4.49

Maximum exit price: $5.24

Maximum reward-risk ratio: 1.24 to 1

Did I trade this setup? Yes

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

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