Monday, February 26, 2018

From Contraction Comes Expansion

Art of Trading members and also long time twitter(@TraderStewie) followers have probably heard me say the words:  "From Contraction Comes Expansion"

..... well today, we're going to discuss in detail what this means exactly and how this simple concept can be so incredibly effective!!

So here we go!

Last Thursday evening as i was doing my NIGHTLY scans for Art Of Trading(AoT) members, WATT caught my attention as i was scanning my 'Power Earnings Gaps' watchlist.

Here's the original setup that caught my eyes and that's the exact setup that was sent to AoT members Thursday evening as a stock to watch the next day! And actually i liked this WATT setup so much, i actually made it the 'AoT Top Pick'!

...."From Contraction Comes Expansion" .... 

What does that mean? And why does this "simple" concept matter here for this WATT chart??

Well, let's analyze this WATT chart closely for a minute!

First of all, notice the HUGE, almost ridiculous 2 powerful spikes up(huge "volatility expansion") in late December 2017. Major news was announced for that company!

After such a big 2 day move, WATT needed to digest that huge move and it did that by pulling back quite a bit in Jan. 2018..... And come Feb. 2018, WATT went into a "volatility contraction" period as the price action on the intra-day ranges became smaller and smaller, contracting into smaller and smaller minuscule candles.... in essence, the stock became more "BORING"!!!


Perhaps it become "boring" to the untrained eye!!

Experienced traders know fully well that "From Contraction Comes Expansion!"

Especially note, the trading action in that WATT chart in the last 3 or 4 days in the above chart! It almost appeared as if WATT went into a "coma" like state....

Doesn't get more "BORING" than that!! Am I right?? 

Well, guess what, this's actually the exact time to PAY ATTENTION to that WATT chart and NOT SWITCH OFF!! 

Why? What is so interesting about that "Boring" ass chart, Stewie?!! 

Why on earth would you even make this stock the "AoT Top Pick" for that matter?? 

"Stewie has officially lost his damn mind!!"

It's time to pay attention because "FROM CONTRACTION COMES EXPANSION"! 

In other words, after the last few days' mini, sideways, smallish and "boring" price movement in WATT, this stock is about to wake up in a big way!

Keep in mind, after periods of mini, coiling and narrowing price action(aka, low volatility), stocks will often explode or surge in volatility!!

This trading concept is actually similar to that last Blog Post i made called:

**Keep in mind, WATT has over 30% short interest!** 

When a stock with over 30% short interest goes into "CONTRACTION" mode and is gearing up for "EXPANSION" mode.... get ready to see something awesome!!

Fast forward to Friday's opening bell !!

10 minutes after the opening bell on Friday morning, I sent out this tweet to AoT members....

WATT just triggered a long entry. Stop loss goes to just under today's opening lows($19.90)

WATT triggered a long entry once it broke over $20.60 , roughly 10 minutes after the open....

Look at that BEAUTY!! Not so "boring" , huh?!

As soon as WATT triggers that $20.60 entry, we immediately put a stop a few pennies under the day's lows(so in this WATT case, stop was $19.90) ... Target is $24.00

About an hour later, and after seeing WATT continue to steadily climb strongly higher, it was time to move stops up and protect some gains!!

So this tweet was sent to Art Of Trading members:

Can move stop loss to $21.00 now .... You'll be exiting this trade with a nice gain even if $21 gets tagged today!

For aggressive DAY TRADERS...

WATT offered a new entry intra-day as it formed a BULL FLAG pattern....

WATT starting to create a BULL FLAG intra-day

A few minutes later....WATT took out that intra-day BULL FLAG and never looked back!

Breaking out thru that "bull flag"... Stock looks very hyper and angry today!

Move WATT stop loss to $22.00 Locking in roughly +$1.40 or about +7% gain if stopped out

And for those of you who are still holding WATT(AOT Top Pick) for today...the stoploss has now been moved to $22.00 and as long as we don't stop out today I do intend to swing trade this one into next week! If you missed it, don't beat yourself up just be ready for the next one!

As you can see, WATT had a nice strong move the whole day from start to finish pretty much after 3 or 4 days of "CONTRACTION" exploded into an nice "EXPANSION" move higher which was good for a cool +12% move!

Entered WATT long at $20.60 and now have a raised stop loss at $22.00(target $24.00)

Finishing up this post on a Monday morning since we were swinging WATT ....

WATT, gapped up to open on Monday morning and ran up to $23.45 before fading back lower.....

WATT has stopped us out at $22.00! A very nice gain even if it couldn't get to $24.00

So we stopped out WATT for a cool +7% gain in only 2 days! 

Really wanted that "$24 target" to exit WATT but you gotta take what the market is willing to give you! You don't get to make the rules or tell the market what it should do. We take what she's willing to give by moving up the stop losses along the way and be grateful(humble enough to accept what she's willing to give at that moment)! 

Now, we focus on the next trade! 

As usual, my favorite part of all this is the feedback i get from 
Art of Trading members and also my twitter followers!!

Replying to 
Thanks. Glad I joined AOT. Totally worth the knowledge you spread around in this community. Lifetime skills.

Replying to 
EC and WATT my two first trade with you guys(Art Of Trading). Nice... 👏

Replying to 
Thanks Stewie - (lots of Love !!) Calling this a win

Replying to 
I got in later but still up of 5.5% great call. Almost paid for the year on this one trade

Replying to 
you called it, and should get the credit! nicely done, and glad i saw this “in time”😎👍

Friday, January 5, 2018

The Calm Before the Storm

Hey folks,

I wanted to start the 2018 year writing about a setup in OSTK I mentioned on twitter earlier this week...

Now, when you first look at the chart of OSTK, surely some of you will be scratching your heads saying "what the hell did he like so much about this one?"

So, today I'm going to discuss "the calm before the storm" ....

First of all, a fellow ART OF TRADING member ( @GaelicAidan )  emailed me and asked for a 'Chart Request' for OSTK....

I did a chart analysis on it and here's the OSTK chart I tweeted out on Tuesday morning, both to Art of Trading members and on my @TraderStewie public twitter stream !

There was a lot to like about this setup if you knew what you were looking at and that's exactly I intend to do today, to TEACH YOU how you can spot some of these powerful setups BEFORE they start rampaging and catch them while they are still "sleeping" so you can buy them during the "calm" phase and reap the rewards during the "storm" phase!

Here's the exact OSTK chart I sent out to AoT members and also my twitter followers on that Tuesday morning.... 

Notice how OSTK, which is a stock I've come to know quite well over the last few weeks since it's been a fun stock to trade with that big surge in momentum in Q3 2017 .... Also, important to note, that OSTK has over 50% short interest!! That's just INSANE to think that more than half of the shares outstanding are sitting in SHORT POSITIONS!

This stock has SHORT SQUEEZE written all over it!

Notice how OSTK has made several BIG dramatic run ups lately and a couple of times, OSTK make equally as dramatic pullbacks too! This stock is definitely NOT a "slow mover" and it is definitely NOT for the faint of heart... OSTK is a trader's dream IF you play it right.

Watch OSTK chart closely in the first 2 weeks of December, made a gigantic run up from $42 to $82! It basically doubled in 2 weeks! Now, keep in mind we are not talking about a penny stock here!!

Now, watch the OSTK chart very closely and you'll see that after topping out in mid December, it made a big retracement from $82 to $56.... then it tried to make a bounce/attempt for a couple of days before "faltering" for a few days.... NOW, those "faltering" days are the KEY to this setup....
The stock deceptively put many traders to "sleep" as it basically went into a 4-5 day "coma". The stock literally went to sleep the last 4-5 days and most traders on twitter whom I follow stopped talking about OSTK(usually a sign, traders have moved on to other names which are more active)....
But, I've seen this way too many times and know fully well, stocks with huge short interest like OSTK do not stay "quiet" for too long before they start getting rowdy and wild again! other words....

..............IT'S THE CALM BEFORE THE STORM .....

Here's two tweets I sent out on Wednesday to AoT members and also on public twitter.

Here's what OSTK chart was doing on the intra charts..... note, the "small liftoff" candle at around 12;50PM that broke out of that mini intra-day sideways consolidation.... When I saw that candle perking up, I started to feeling a better about the prospects of this setup... Felt like this stock was about ready to turn the corner for real and start something special ...

When stocks with HUGE short interest like OSTK go thru a "quiet" period for a few days(especially when they have been running HOT recently), you should know right away, that we have a "calm before the storm" scenario brewing and be READY!

Look at that EXPLOSIVE move!! This stock is in full blown ATTACK MODE! 
What ever you do, DO NOT SHORT an "angry" mover like this!
Stocks that move like this usually go on to run much much HIGHER!

And here's what OSTK looked like on the daily charts.... 

As you can clearly see in the chart below, OSTK broke thru that symmetrical triangle's $66.30 breakout area spot with NO effort what so ever....that told me, this stock is about to get really WILD! 

Trades like this OSTK are only as good as the VOLUME that pours into them, so for us to have true confidence that we have a BLOCKBUSTER trade, we need to see VOLUME! VOLUME! VOLUME! The more, the better!! .... so naturally I was watching the intra-day charts closely on OSTK with great intent .... What I wanted to see was OSTK's volume ramp up BIG TIME in the final hour and especially going into the close that day.... that told me that a fraction of the heavy short positions in that stock are surely starting to "panic cover" in droves!! "Panic covering" is a long trader's best friend! Panic covering on big volume means the stampede has only just started and likely to continue up for at least 1-2 days minimum, if not 3-4 more days!

Here's how OSTK closed on that Jan. 3rd 2018 and I made sure to tweet it out to let the traders who are still long in OSTK to hang on as more gains were likely coming the following day....

 ....Here's a post-market breakdown of what I was seeing on the INTRA-DAY charts.... 

.... OSTK, the following day .... 
Blew right past my first target of $70  

..... OSTK Chart today ..... OSTK shot up a whopping +30% in 4 days! 

So hopefully, after reading this post, you'll have a little better idea of how to spot a "sleeping giant".... and always remember when the market puts some stocks to "sleep", it's doing that PURPOSELY....
so don't fall asleep and be on the lookout for "the calm before the storm".

As many of you know by now, what I LOVE most about these sorts of big EXPLOSIVE trades(like our ROKU trade from 2 weeks ago), is the feedback I get from both Art of Trading members and also my twitter followers when I do post a setup publicly!!

Replying to  
Sold 2/3 at $71.40 for 7.40% and Just like that its my best trade this year😀

Replying to
This is indeed my First trade in AOT. I'd like to thank you for all the educational videos on youtube. They are helping me to refine my trading style!

I am @awesom_o Jan 4
I owe you on this one Stewie. Up 15% 📈👍

Steel Larson @SteelLarson 6 hours ago

Even with small position size have made more in this year than any other issue

HiddenPivots @HiddenPivots Jan 3

Michal G @michael_sopot 3 hours ago
Dear Stewie,
I am 26% up on OSTK. Thank you. I have a good wine for you: Marques de Murrieta Finca Ygay Reserva 1984.   How can I send you?

Don’t know how you do it Stewie but you just did it again! Thanks for the $1600!

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