AXLA DAY TRADE SETUP – STOP AND GO, VWAP BOUNCE FOR 1.24 : 1 MAX REWARD RATIO

Axcella Health Inc (AXLA) announced positive results from a clinical study of two of its products, AXA1125 and AXA1957, for the treatment non-alcoholic fatty liver disease (NAFLD). Its stock price traded in a channel with high volatility, then made a sharp bounce off the VWAP during the first 45 minutes of trading. The setup provided a maximum reward-risk ratio of 1.24 to 1. See my analysis below.

AXLA - Winning Day Trade Setup - Stop and Go VWAP Bounce - 05-06-2020

ACCOUNT OF EVENTS

The markets opened with an upward bias, with the Dow at +0.64 percent when I checked at 6:30 AM PT.

CNBC’s main headline read “Stock futures rise as investors bet on the economy reopening.” I personally think that even if businesses start to re-open, it will be a while before consumers start to feel that it is safe enough to go out, spend and circulate money. So, I didn’t find anything fundamental about this.

The morning’s top gainers on Finviz was dominated by biotechnology and medical device stocks.

MDGS held the #1 spot. I recorded a winning setup for this stock in the past so I was immediately interested. Volume looked great on it and there was positive news regarding a patent. Unfortunately it was already trading far below the VWAP, so I skipped it.

ISEE held the #2 spot. Volume was could have been better but I’ve seen stocks trade well on lower volume. News was mixed on it. It had an earnings beat, but it also had to pause enrollment for a clinical trial due to the Covid-19 situation. It was also trading far below the VWAP, so I skipped it as well.

AXLA held the #3 spot, up over 31 percent and with over 100,000 shares traded. It had decent volume. I felt the positive news regarding the clinical study was a strong enough catalyst. It had a strong opening. I put this on my mental short list, but was still interested to see if other setups would develop.

In fact, I made a losing trade of SDC. For some reason, I thought I had traded it successfully in the past, but looking at my confirmations, it turned out I had not. I also normally don’t trade the first 5-10 minutes, but I guess impulse got the best of me. At any rate, I’ve logged that trade in my data tracker for future reference.

AXLA - Winning Day Trade Setup - Finviz 6:30 AM PT - 05-06-2020

I did a refresh of Finviz at 6:39 AM PT. Apparently I missed the fact that MGNX jumped to the #2 spot out of nowhere. That ended up making a much better move than AXLA. As you can tell, I’ve had better days.

It had fallen a bit in percent gain but still maintained the #3 spot and it had doubled in volume, so I was still interested.

AXLA - Winning Day Trade Setup - Finviz 6:39 AM PT - 05-06-2020

At 6:42 AM PT, AXLA popped back up above the VWAP after having dipped below it during the few previous minutes. It stopped just short of $6.40, with a high at $6.39 and a close at $6.35.

I anticipated a bounce off the VWAP, so I waited for the next minute candle to develop for confirmation. At 6:43 AM PT, the stock touched $6.40, trading very narrowly and closing at $6.35. I quickly put in a buy stop market order at $6.41. I saw that there was support at $6.00, well below the VWAP, so I had an intended stop loss at $5.99. I was going for a 2 to 1 reward-risk ratio, so I had an intended target limit order at $7.25 [ (($6.41 – $5.99) x 2) + $6.41 ].

My order got filled at 6:45 AM PT when AXLA made a quick pop to $6.62. But it lost momentum and pulled back to the VWAP soon after. It spent the next several minutes there and I thought I would get stopped out.

Fortunately at 7:11 AM PT it made a strong bounce off the VWAP, and at 7:14 AM PT it reached $6.94. Since the price had reached the 1 to 1 reward-risk ratio price of $6.83 [ ($6.41 – $5.99) + $6.41 ] I moved my stop to break even.

Sadly, AXLA made another downturn and hit my break even stop loss at 7:19 AM PT.

It was disappointing to not have reached my target, but I am glad that I determined my stop loss correctly and managed my trailing stop well. Since it could have yielded me a profit if I had went for a 1 to 1 reward-risk ratio, I will log this in my data tracker as a winning setup.

NOTABLE DATA POINTS

Date: 05-06-2020

Day of week: Wednesday

Approximate market performance at open: Dow 0.64%, S&P 500 0.62%, Nasdaq 0.00%

Company name: Axcella Health Inc.

Symbol: AXLA

Industry: Biotechnology

Recent news date: 05-06-2020

Recent news headline: Axcella Announces Positive Top-Line Data from AXA1125-003 Clinical Study Showing Multifactorial Activity in Adult Subjects with NAFLD

Approximate performance before buy signal: +26.34%

Approximate volume before buy signal: 218,601

Float: 16.93 million shares

Setup: Stop and Go, VWAP Bounce

Buy signal time: 6:43 AM PT

Entry time: 6:45 AM PT

Maximum exit time: 7:14 AM PT

Entry wait time: 2 minutes

Max exit wait time: 29 minutes

Order type: buy stop market

Entry price: $6.40

Stop loss price: $5.99

Maximum exit price: $6.93

Maximum reward-risk ratio: 1.24 to 1

Did I trade this setup? Yes

MDGS DAY TRADE SETUP – VWAP BOUNCE AND HIGH OF DAY BREAKOUT FOR 1.45 : 1 MAX GAIN RATIO

Medigus Ltd (MDGS) announced today that it recently received its first commercial order for COVID-19 serological test kits. Its stock traded heavily today during the first hour of trading, bouncing off the VWAP and briefly trading above $5.00 before making a gradual decline that lasted through the day. The short lived move provided traders an opportunity to achieve a maximum gain-loss ratio of 1.45 to 1. See my analysis below.

MDGS - Winning Day Trade Setup - VWAP Bounce and High of Day Breakout - 05-01-2020

ACCOUNT OF EVENTS

The setup occurred on Friday, May 1, 2020.

At 6:30 AM PT I checked my TD Ameritrade app to see how the markets were doing. There was negative bias, with the Dow at -1.77%.

I headed over to CNBC to see if there was any news to aid me in my trades today. There didn’t seem to be anything fundamental as the main headline read “Dow set to fall more than 400 points after best month in three decades, Amazon leading tech lower.”

I opened up Finviz to see this morning’s top gainers. There were only a handful of stocks that were up 10 percent or more, which is not unusual for a Friday. Even less so were the number of attractive stocks. Sometimes I actually prefer this, as it makes it less complicated to narrow down, especially when one of them has glaring positive news on it.

Right at the #1 spot was MDGS, up over 82 percent with nearly 6 million shares traded. The news was quite positive. I figured it was a good catalyst since the US’ struggles with Covid-19 testing have been well publicized. I placed it at the top of my mental short list.

Myomo (MYO) held the #2 spot and had great volume, but there was no news on it. There was negative news on it a few weeks ago, so I didn’t write it off completely, as it could have possibly been a good recovery play. I have, in fact, traded that stock successfully in the past.

Akari Therapeutics (AKTX)  held the #3 spot. It had positive news on it, but it was well below the VWAP already and didn’t have much volume.

I watched these stocks for the first 10 minutes of trading. MYO and AKTX sold off hard while MDGS was oscillating across the VWAP. I decided to lock onto this one and ignore the others.

At 6:41 AM PT it popped up sharply above the VWAP and touched $4.41. Then, at 6:42 AM PT it pulled back and touched $4.00. With this in mind, I placed a buy stop market order at $4.46 with an intended stop loss at $3.99.

MDGS then made some big strides up, filling my buy order at 6:45 AM PT. I added my stop loss soon after. Since I was going for a 2 to 1 gain-loss ratio I placed my target limit order at $5.40 [ (($4.46 – $3.99) x 2) + $4.46 ].

At 6:47 AM PT the stock broke its high of day. It then bull flagged and pushed as high as $5.15 at 6:52 AM PT. I moved my stop loss to break even because the stock reached my 1 to 1 gain-loss ratio price of $4.93 [ (($4.46 – $3.99)) + $4.46 ].

I was hoping MDGS was reach my 1.5 to 1 gain-loss ratio price of $5.17 [ (($4.46 – $3.99) x 1.5) + $4.46 ] so I could move my stop loss to $4.93 and lock in a 1 to 1 gain-loss ratio. Unfortunately it never did and I got stopped out at break even at 7:09 AM PT.

Anyone who was going for a 1 to 1 gain-loss ratio would have profited from this setup. So although I myself did not profit, I am logging this as a winning setup in my data tracker.

NOTABLE DATA POINTS

Date: 05-01-2020

Day of week: Friday

Approximate market performance at open: Dow -1.57%, S&P 500 -1.75%, Nasdaq -2.05%

Company name: Medigus Ltd.

Symbol: MDGS

Sector: Medical Appliances and Equipment

Recent news date: 05-01-2020

Recent news headline: Medigus and L1 Systems Received First Commercial Order for COVID-19 Testing Kits

Approximate performance before buy signal: +75.05%

Approximate volume before buy signal: 14,492,009

Float: 2.33 million shares

Setup: VWAP Bounce and High of Day Breakout

Buy signal time: 6:43 AM PT

Entry time: 6:45 AM PT

Maximum exit time: 6:52 AM PT

Entry wait time: 2 minutes

Exit wait time: 7 minutes

Order type: buy stop market

Entry price: $4.46

Stop loss price: $3.39

Maximum exit price: $5.14

Maximum gain-loss ratio: 1.45 to 1

Did I trade this setup? Yes

MRKR DAY TRADE SETUP – VWAP BOUNCE AND HIGH OF DAY BREAKOUT FOR 2.5 : 1 MAX GAIN RATIO

Marker Therapeutics, Inc (MRKR) announced yesterday that the FDA granted its “Orphan Drug” designation to MT-401, one of the company’s drugs used to treat patients with acute myeloid leukemia (AML), following allogeneic stem cell transplant. Its stock price consolidated during the first half hour of trading before making a break above the VWAP. It then proceeded to make a slow break above its high of day, and a final bounce before a sharp rise upward a little past 8:00 AM PT. The setup provided a maximum gain-loss ratio of 2.5 to 1. I entered late and and achieved a 1 to 1 gain-loss ratio. See my analysis below.

MRKR - Winning Day Trade Setup - VWAP Bounce and High Of Day Breakout - 04-30-2020

 

ACCOUNT OF EVENTS

The setup occurred on Thursday, April 30, 2020.

At 6:30 AM PT I saw that the markets were down, with the Dow Jones Industrial Average at -1.03%.

A headline on CNBC read, “Dow futures fall more than 300 points as jobless toll from virus tops 30 million.”

There was surely a bearish outlook for the day, so I knew I had to be extra diligent about finding stocks with a solid pattern and positive fundamental news on it.

I headed on over to Finviz to check out the morning’s top gainers. Unfortunately the choices did not seem very attractive at the time. They either had great patterns but no news on them, or great news with terrible patterns, including MRKR, which was at the #5 spot. It was up over 21 percent and traded over 300,000 shares. Unfortunately it sold off hard below the VWAP so I passed on it.

I spent much of my morning just waiting it out, refreshing Finviz every 5 minutes, but everything seemed to come up short. I entered an order on a stock that seemed to recovering from bad news, but the pattern couldn’t hold and I canceled my order. I even ended up missing a good trade on another stock (MTDR – setup logged in my data tracker). MRKR had fallen off the radar, dropping down to the #11 spot at one point.

I was about to chalk it up as just one of those lackluster mornings, which I suppose is not uncommon on bearish days such as this.

But then at 7:19 AM PT I saw that MRKR had jumped back up to the #3 spot on Finviz, up over 27% and over 1 million shares traded. I checked its chart and saw that it had already made a bounce off the VWAP as well as two bull flag poles. Usually by this time I would consider it too late to enter, but the stock had just broken through its high of day and was still under $3.00. I gambled on the chance that the positive news could squeeze it up considerably past $3.00.

At 7:20 AM PT the stock pulled back, hitting a low of $2.85. The recent high was $2.93 so I put in a buy stop market order at $2.96, the next 5 cent level plus 1. My intended stop loss was $2.79, the nearest 10 cent level below minus 1. I was going for a 2 to 1 gain-loss ratio so my intended target limit order was $3.30 [ (($2.96 – $2.79) x 2) + $2.96 ].

At 7:21 AM PT MRKR turned from red to green during consolidation. It spent a few minutes at the $2.90, during which I was able to add  my stop loss and target limit levels to my open order with an OCO (Order Cancels Order) condition.

My buy order eventually got filled at 7:26 AM PT. At 7:27 AM PT MRKR hit $2.99. I began to cheer silently as I anticipated a breakout above $3.00 within the next few minutes.

But at 7:27 AM PT MRKR pulled back rather strongly, then seemed to be losing steam as it struggled to stay above $2.90. It touched $2.99 again at 7:36 AM PT. I breathed a sigh of relief as I thought resistance had been finally worn down, but the stock made yet another strong pull back, hitting $2.81 at 7:39 AM PT.

I felt my stop loss would eventually be hit as MRKR kept trending downward. At 7:49 AM PT it hit $2.80. A loss seemed inevitable.

But to my amazement, support held at $2.80 and not a penny less. MRKR reversed off the VWAP, also at $2.80, making a slow and steady comeback.

At 8:01 AM PT, MRKR ripped past $3.00, hitting a high of $3.20. I moved my stop loss to break even because the stock reached a 1 to 1 gain-loss ratio price, which was $3.13 [ (($2.96 – $2.79) + $2.96) ].

Furthermore, I like to move my stop loss to lock in a 1 to 1 gain-loss ratio once a stock reaches the 1.5 to 1 gain-loss ratio price, which was $3.21 [ (($2.96 – $2.79) x 1.5) + $2.96) ]. MRKR reached $3.22, so I quickly moved my stop loss to $3.13.

MRKR could not push any higher and my stop loss was hit at 8:05 AM PT. Not the gain I was shooting for but a gain regardless, and I was happy that I practiced good trading mechanics.

Looking back at the chart, I realized that I could have achieved a 2 to 1 gain-loss ratio if I had paid more attention to the stock and put in a buy order at $2.91 when the stock pulled back slightly at 7:15 AM PT. By that time it held a respectable #8 spot on Finviz, up over 21 percent and with over 800,000 shares traded. Hopefully as I get more seasoned I will become better at spotting these opportunities. For this reason, I will log the setup with a $2.91 entry in my data tracker.

NOTABLE DATA POINTS

Date: 04-30-2020

Day of week: Thursday

Approximate market performance at open: Dow -1.03%, S&P 500 -0.68%, Nasdaq -0.03%

Company name: Marker Therapeutics, Inc.

Symbol: MRKR

Sector: Biotechnology

Recent news date: 04-29-2020

Recent news headline: Marker Therapeutics Receives FDA Orphan Drug Designation for its Multi-Antigen Targeted T Cell Therapy for Acute Myeloid Leukemia

Approximate performance before buy signal: +21.67%

Approximate volume before buy signal: 859,878

Float: 31.77 million shares

Setup: VWAP Bounce and High of Day Breakout

Buy signal time: 7:16 AM PT

Entry time: 7:19 AM PT

Maximum exit time: 8:03 AM PT

Entry wait time: 3 minutes

Exit wait time: 44 minutes

Order type: stop market buy

Entry price: $2.91

Stop loss price: $2.79

Maximum exit price: $3.21

Maximum gain-loss ratio: 2.5 to 1

Did I trade this setup? Yes, with late entry

CMRX DAY TRADE SETUP – VWAP BOUNCE AND HIGH OF DAY BREAKOUT FOR 3.34 : 1 MAX GAIN RATIO

Chimerix, Inc. (CMRX) announced today that it is beginning phase 2 of 3 of its study of dociparstat sodium (DSTAT) to reduce excessive anti-inflammatory responses in patients with severe Covid-19 infection. The announcement came a day after it announced that the FDA approved the aforementioned study. Its stock price traded back and forth along the VWAP during much of the first hour before breaking its high of day. It surged even higher a little past the first hour. The setup yielded a maximum gain-loss ratio of 3.34 to 1. See my analysis below.

CMRX - Winning Day Trade Setup - VWAP Bounce and High of Day Breakout - 04-29-2020

 

ACCOUNT OF EVENTS

The setup occurred on Wednesday, April 29, 2020.

I usually get up really early in the morning to do my routine before the markets open, but I forgot to set my alarm last night, and I woke up right when the markets opened.

So I jumped out of bed to grab my phone and start putting together my trading setup.

At 6:32 AM PT I checked how the markets were doing. There was strong upward bias as all three major indices were up more than one percent, with the Dow Jones Industrial Average at +1.52%.

Next, I headed over to CNBC to check for any major news that would aid me in my trading today. A headline read “Dow surges more than 400 points as positive Gilead news lifts hope for coronavirus treatment.” Gilead is a big, slow moving stock so I knew I wouldn’t be trading it. However, I had a feeling that the news would push up smaller stocks in the biotechnology. So, I made a mental note of that.

Then I headed over Finviz to check out the list of top gainers. Indeed, there was a biotechnology stock (CAPR) that was in the number 1 spot. It had positive news on it, so I looked at its chart. Unfortunately it was selling off below the VWAP a bit, so I passed on it. It would eventually make a powerful move up later in the morning. I missed that trade but I have logged the setup in my data tracker.

I moved on to the remaining top gainers, which turned out to be disappointments. Many of them had false breakouts. So I waited it out, refreshing my view on Finviz every 5 minutes.

At 6:44 AM PT I saw that CMRX had jumped up to the number 4 spot on the list. I checked its chart. It had made a strong close at $2.07, its high of day at that moment. It was up over 34% and traded over 3 million shares. I saw the positive news on it and started looking for my opportunity to enter a trade.

But then it started selling off, going back below the VWAP reaching as far down as $1.88. Since it was both below the VWAP and that critical whole dollar support ($2.00) that I like to see, I wrote the stock off and started looking at other stocks.

The charts on the other stocks did not look interesting either though, and I spent the next several minutes just waiting. I was about to think that it would be a lackluster morning, but at 7:09 AM PT I saw that CMRX at shot back up to the number 2 spot on Finviz, up over 34% again and had over 5.5 million shares traded.

I checked the chart and I saw that it had touched $2.07 again before dropping back down to the VWAP. Seeing that it touched this exact price twice, I had a feeling that if it could make a strong bounce off the VWAP it could break past this level, which could have opened up a window for a rally.

At 7:12 AM PT the stock did in fact make a strong bounce off the VWAP. I then closed higher with each minute testing $2.07 once again at 7:16 AM PT.

I quickly put in a buy stop market order at $2.11, with an intended stop loss at $1.99. CMRX then broke past $2.10 at 7:17 AM PT, and my order was filled.

I quickly went  to my open position and added my stop loss price with an OCO (Order Cancels Order) condition. Since I was shooting for a 2 to 1 gain-loss ratio I added my target limit price of $2.35 [ (($2.11 – 1.99) x 2) + $2.11 ].

CMRX pulled back between 7:20 AM PT and 7:23 AM PT before pushing higher. It then exploded past $2.20 and $2.30 at 7:31 AM PT, during which time my target limit order was filled. I didn’t even have time to move my stop loss to break even. The stock continued to push higher during the next several minutes, eventually reaching a maximum exit price of $2.61.

While I am happy with the result of this trade, I think I entered it a little early. Normally I would wait for a pullback after a strong price movement, but I didn’t this time. I’ll chalk it up to simply not following the rules in the heat of the moment.

Looking back at the chart, I see a safer entry at $2.21. The buy signal would have been the switch from red candle to green candle at 7:21 AM PT during the pullback. The stop loss price would have been $2.09, a penny below the ten cent level at the bottom of the pullback. The target limit price for a 2 to 1 gain-loss ratio would have been $2.45 [ (($2.21 – $2.09) x 2) + $2.21 ], which would have been reached at 7:32 AM PT.

Since one of the goals of this blog is to cover clean and clearly defined setups, I have entered the data of the more conservative setup on this post, but recorded the data for both setups in my tracking log.

NOTABLE DATA POINTS

Date: 04-29-2020

Day of week: Wednesday

Approximate market performance at open: Dow +1.52%, S&P 500 +1.85%, Nasdaq +2.13%

Company name: Syndax Pharmaceuticals, Inc.

Symbol: CMRX

Sector: Biotechnology

Recent news date: 04-29-2020

Recent news headline: Chimerix Announces Initiation of a Phase 2/3 Study of DSTAT in Acute Lung Injury for Patients with Severe COVID-19

Approximate performance before buy signal: +39.74%

Approximate volume before buy signal: 6,752,489

Float: 50.62 million shares

Setup: VWAP Bounce and High of Day Breakout

Buy signal time: 7:21 AM PT

Entry time: 7:30 AM PT

Maximum exit time: 7:46 AM PT

Entry wait time: 9 minutes

Exit wait time: 16 minutes

Order type: stop market buy

Entry price: $2.21

Stop loss price: $2.09

Maximum exit price: $2.61

Maximum gain-loss ratio: 3.34 to 1

Did I trade this setup? Yes, with early entry

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

 

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