LI Trade on Feb 27, 2023 11:23 from Maarten: Tradervue User Stock Trades.

LI 27-2-23
Catalyst: Earnings in line, profit more than doubles.
Setup: positive reaction reversal, 5.25%
Technicals: Short term retracement towards the 50SMA. Could be a strong start of a uptrend with this gap up. LT LI is stronger.
Pre volume buzz: 6.8%
Decent catalyst but could be a lot stronger.. Technicals are okay, reaction reasonable. Good volume. 7/10

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Review the signals that led you to identify the trade opportunity SETUP? Screenshot the chart BEFORE and DURING it was setting up. Add notes.**

Think I did well on picking a good setup. Perhaps it was more than a 7/10 setup, but the fact that it had sold of almost 65% last year without pulling in is a weak factor. Makes the price action of last months feel more like a bearish pull in. Wasn’t too crucial for today but it’s something I should definitely spot.

How successful were you in identifying the market environment and playbook variables during the trading session?

Switched bias. Obvious bearish open drive. Identified a potential bottom after the open. Needed to see more weakness or a very clean pull in. I got more weakness and price rejected the PDL. A best practice what I am going to do is writing down checks that are and aren’t in my favor. I can see in my live notes that I saw some variables I didn’t like. Had I wrote it down then it would like this:

Checks in favor
-Confirmed weakness/downtrend AFTER the open.
-Rejection of PDL on very low volume compared to preceding selling  might get tested again clean pull in.
-Lower high made.
-Strong offers at 23.50, prior intraday resistance.

Checks not in favor
-Relative shallow, but still above average volume.
-Large green candles in retracement. Looks more like a reversal than retracement.
-Very close to support levels: PDL and 50SMA. Not as much downside potential.
-Lower volume: <200% volume buzz.

Improving gameplan
I knew it wasn’t an amazing setup. This is a practice I should do more often and then grade the trade again. This is definitely not an A+ setup. All those variables should perhaps make me more patient, risk less in the future and take profits quicker.
Perhaps I can start using my analysis to come up with the right trade management. Examples from YTC:
Trade management – Conditions favoring target.
Trade management – Conditions favoring trailing stops.
Trade management – Conditions suggesting scratch & reassessment.
Trade management – Conditions suggesting re-entry after initial stop out.
I would probably have chosen for the second trade management which is more defensive I would say.

Also there are four quick questions I should ask myself pre-entry:
1) Do I have good read of the market structure?
2) Does this trade idea make sense in this structure and context?
3) Does my entry plan make sense in the current conditions?
4) How should I manage the trade in current conditions?
Answers:
1) Think I had a good read but should be more specific and structured by writing it down like I did above.
2) If we have a clean pull in on low volume and hold the 20EMA, unable to test VWAP, THEN I think this has a decent chance to bounce and make a new LOD. The chance of making a higher low followed by ranging price action or a move to VWAP is also very plausible.
3) Don’t have specific entry plans yet. It’s clear that the I want to entry criteria to be perfect. Need some thought and work on different type of entries. Two different types I can think of would be aggressive vs patient. I would chose the latter. But how I would implement that specifically needs some more thinking.
4) In hindsight I would have chosen for a more active trade management. Also something I should do some further reading on.

What was the ideal entry point? How does that compare to your entry? What signals (if any) did the market provide, which could have led to an improved entry?

I was impatient on my entry. I got in after a candle that did above average buying volume. I did look at the current volume of that candle and saw that it was very low. But still I should wait at least for the next candle, that’s the new rule.

What was the optimal trade management strategy, in order to minimize risk when wrong or maximize gain when right? How does that compare to your trade management strategy? What signals (if any) did the market provide for moving the stop to breakeven, or beyond?

Prepare management better
Given the quality of the setup and lack of downside potential, I think this is a scenario where I want to use aggressive trailing stops and take profits quicker. The chance of a higher low or 50SMA rejection are higher. Once the trade starts working I don’t want to end up losing on this trade. I would rather cut the trade and get back in.
I haven’t been very precise and flexible with my trade management. I have a couple of sell rules and ATR target which I stuck to. But holding a core on this setup wouldn’t make much sense. I want to do a better job planning the trade management and be more flexible for different setup. This will be something I am going to work on a lot this month. Choosing a trade management condition, one of the four I have listed above, is a good start.

Update expectations & analyze price action mid-trade
This is something I should start doing

Scenario 1: trade not working YET & no reason2sell
-After my entry the volume was VERY shallow.
-Holding the 9EMA and trade didn’t start to work yet.
-Traded 1 penny from my stop level but held.
This is the part where the trade is still setting up and the trade idea is still valid. I should be patient and don’t make too many decisions.

Scenario 2: Trade starts to work.
- Starts of with big red candle through the 20EMA. Tests the low of the retracement. We don’t get above the 9EMA.
-Nonvolatile candles follow. Price doesn’t look like it’s going anywhere but it’s making lower highs.
- Selling volume starts to increase, bigger red candles and now 5m new highs. Clearly trending now.
-Clear extensions from the 9EMA.

CHOCH: Very significant buying volume when trade hasn’t worked yet. This is where I should trail up my stop aggressively.
-I want to take either a partial off immediately or take it off for a new 5m high.
-Put full stop(, if I hadn’t done so already,) to close above 9EMA.

Scenario 3: Trade has worked
-Price made new LOD.
-Given 1) structure of trade and 2)CHOCH I want to take of my full position once this price swing comes to an end.
- Bids start to step up and a 5m new high is made. Here I want to be out and have capitalized.

What was the optimal exit location or locations, in order to minimize risk when wrong or maximize gain when right? How does this compare to your exit location? What signals (if any) did the market provide to identify this ideal exit location?

I got out for a 0.71R loss once price reclaimed the 20EMA and held. Given the setup I don’t think this was a terrible defensive move. But once I see the offers are still holding and price breaks down the 20EMA again, I should hit back in. I should be more aggressive and focused when the trade is still setting up.