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.
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.
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.
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
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.
Recent news date: 05-07-2020
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