Markets grind higher, and I plan to short QQQ if we gap down a decent amount (>.5%). Started a half sized long position in Macys and took losses on BABA and QQQ.

Hi everyone. Last week I bought a half sized long position in Macy’s stock (M) for a longer term swing trade at 15.71. My original plan was to average down the other half of the position, but it looks like I’m much more likely to be averaging up now.

M daily chart below.

Since the trade is working out, I want to add more to this trade. My current risk to my account is about 0.6% if I get stopped out at 14.5. If I average up, I’ll be raising my stop loss up as well to keep the total risk to 1% of my total account value. If price breaks and closes above 17, I’ll average up if it retests 17. If price continues lower, I plan to buy after the first red candle, as long as it isn’t substantially large (close below original entry price at 15.71).

BABA closed very close to my stop loss on April 6th, and since there is overnight gap risk, I exited the position. I considered selling half of the position, but figured selling all of it and reevaluating would be the better and safer option. Since the QQQ short was used as a hedge against BABA, I exited that as well for essentially break even (slight loss).

BABA daily chart below. I wanted to hold this trade until the day before earnings, but it got too close to my stop loss so I sold for a loss (0.7% loss to my account value).

Lastly, I’m planning on shorting QQQ if we gap down more than 0.5% tomorrow. I might start with a half sized position and scale in if we drop further by the end of the day. I’ll be out if we close the day green. Something else I’m considering is just using a full sized position with a somewhat wider stop loss.

Current risk reward strongly favors the downside, so although I’m probably going to lose money on this trade most of the time, when I do win, it’ll be a large win (enough to offset 2-3 smaller losses).

4/8/2021 Started a half sized long position in Macys (M). Going to be a longer term swing trade (~4-5 week hold)

I set two limit buy orders for Macy’s last night, and one of them got filled this morning.

Half the order is for 15.71 (filled this morning), and the other half is for 15.1.

The stop loss is at 14.5 for both orders, and my profit exit is either 19.71 or before earnings near May 13th (about 5 weeks from now)

The current risk to reward, if my other half of the position doesn’t fill, is roughly 1.2 down and 4 up = risk to reward of 1 to 3. If the other half fills, that makes the risk to reward just over 1 to 4.

M daily chart below:

Lastly, if the stock closes at or below 15 on a daily basis, I am most likely out for a loss. As usual, if both positions get filled, my maximum risk is 1% to my account if I get stopped out.

The S&P500 is slowly grinding higher, and most of the time this means it continues higher in the near term without much of a pullback, but let’s see what happens. If we start breaking down, I may short a little bit in order to hedge the downside to M stock. This would change the trade from being just bullish on M to betting that M will outperform the S&P500 in the near term.

4/6/2021 Bought BABA and shorted QQQ (edit: closed both positions today (4/7/2021). Also started a 30% long position in PRLD at $40.

BABA long entry price: 230.55, stop loss 224, target 260-270 range or before earnings report (max risk just under 1% of account)

QQQ short entry price: 331.5, stop loss 338.5, target 317.5 or when out of BABA (max risk 0.5% of account)

Combined max risk: 1.5% of account.

Details/Thoughts:

I usually don’t have hard stop losses on pairs trades, but these two stocks are quite volatile, so I’m using stops.

My BABA position dollar amount is about 50% more than QQQ (200 shares long BABA and 100 shares short QQQ). Since the BABA position is large and I want to avoid having larger losses from an unexpected gap down, I’m hedging the position with a short on QQQ. I plan to hold BABA until the next earnings report in about 3.5 weeks or until it hits my stop loss or profit exit.

I also started a long position in PRLD since Baker Bros are in it and it’s had a large pullback. I don’t have a stop loss, but my max loss if the stock goes to 0 is 0.5% of my account. I plan to average down near 30 if it reaches that price to get close to a full position.

I’ll post charts of these 3 positions later today or tomorrow (I’ll edit this post), so be sure to check back sometime later!

BABA daily chart below. I took the loss today and exited both BABA (-.7% of account) and QQQ (roughly even).

QQQ daily chart below. I’m out of the short today for roughly breakeven. It was used as a hedge against BABA.

PRLD daily chart below. Plan to average down near 30.

4/5/2021 Out of MTCH at 143.5. Edit: Discussion on SPY/QQQ trade idea.

I sold MTCH because the spread is too wide (same issue as YY). I have 100% cash in my trading account, and won’t be trading these tickers in the future.

The most logical thing to do here is to short the market, but I know that I’m usually way too early, so I’ll hold off for now.

Current trade ideas/plan:

  1. I’m thinking of shorting QQQ instead of SPY because they are highly correlated and QQQ moves more.
  2. I will likely go short on a gap down, with a stop loss above the previous day’s high.
  3. Since this is a counter trend trade, the best way to play it would be to use a half position and plan to get out in 1-5 trading days. If one red day isn’t followed by any selling pressure the next day, get out for a small gain or loss and wait for the next opportunity.
  4. Last possibility is shorting the indexes if we gap up large again tomorrow since risk to reward would be favorable if we are targeting the ~400 ish gap fill area (for SPY).

It’s still preferred to go long with the market (since we are in an uptrend), but current levels are not suitable for my pullback strategy. A pullback to the 400 level (for SPY) would be the earliest entry level.

4/3/2021 Recent trades have been working out, so I’m taking larger sized positions. However, I did get stopped out of YY for a loss. S&P500 at all time highs.

Welcome back – I hope you are enjoying the long weekend. I’m having a good time because I’ve been getting back on a routine for practicing piano and studying for the SIE exam.

The last month has been quite good in terms of following my trading plan and I have also being rewarded for it. My normal swing trading win rate is about 43% over 200+ trades, but for the last month, I’ve won on 8 out of 9 trades, with the wins being significantly larger than my losses. This is interesting because the month before (February), I had 3 wins and 5 losses, with the losses being significantly larger than my average loss.

A specific stock trade I took a month ago was bothering me until recently. I think that because I got over this issue, my recent trades have been more successful. What happened during this trade is possibly the worst thing that can happen to a stock trader or investor. In fact, I’ve found that this “worst thing” applies to other areas of my life as well. I’ve noticed this issue occur in poker (Texas Hold’em), piano practicing, and studying or taking exams.

Before I discuss what I think is the worst thing that can happen to a stock trader or investor, do you want to guess what it is? I’ll share my thoughts below the following chart of SQ.

I believe the worst thing that can happen to a stock trader or investor is doing something wrong, but getting rewarded for it. In the above chart of SQ, I entered at around 225 (arrow points to the candle I bought on) with a stop loss at 215 and a profit exit at 265 (risk 10 to get 30). Everything is good so far – I’m following my trading plan – buying an up trending stock on a pullback with a minimum risk to reward of 1 to 2.

I sold at around 250 three days later before the stock price plummeted. I made a large profit, but I didn’t sell at 265. I sold too early. But wait, I made a lot of money, isn’t that good? No, the rest of the chart doesn’t matter – just because the price dropped enough to stop me out of a highly profitable trade doesn’t mean what I did was correct. In fact, what I did was extremely bad and wrong. I simply sold because I was scared I’d lose my profits, and I broke my initial plan.

I learned an important lesson from this trade – either have a very specific plan for what I’ll do after price fluctuates BEFORE taking the trade, or don’t change anything from the original plan.

Below is another one of my recent trades, but this time I didn’t sell early despite having extremely strong urges to sell before my profit exit. I learned from my mistake, and I just happened to be rewarded for it this time. I also had a much more detailed plan for this trade, which I followed precisely.

ORCL daily chart below:

For next week, I currently only have one position (long position in MTCH) which has gone my way surprisingly quickly so I’ll be holding onto it and not selling early. My most recent loss was a long position in YY, which is highlighted in the previous blog posts. I did a good job cutting the loss early. The stock ended up swinging violently higher right after I sold, but that is ok, I followed my initial plan.

S&P500 is at all time highs, so my current plan is to either stay long and add a few long positions or wait for a pullback. I’m also considering shorting stocks if we gap up large on Monday.

3/31/2021 Out of PTON at profit exit of 103.23, and stopped out of YY at 92.33 for loss. Out of MRO at 10.73 (shares and short calls).

Quick update:

PTON hit 103.23 (my original profit exit, so I’m out). Daily chart below:

YY hit my stop loss at 92.33 so I’m out for a loss. Both positions were half sized, so my max loss is 0.5% of my account, and max gain is 1% of account. YY daily chart below:

The trades played out like the scenarios I imagined. Although I got stopped out and lost money on YY, it’s good to confirm that the price moved quickly in one direction, and that my half sized position was appropriate. YY seems to have a very wide spread during the middle of the day, which is not good for trading.

I also sold the other half of my MRO position at 10.73 today. Both the MRO positions qualified for long term gains, which is good since I bought at an average price of 3.5 in March of 2020 (would owe a lot of taxes).

3/30/2021 Bought YY at $96.38 and MTCH at $131.48 near market close today (both are half sized positions). Closing out rest of MRO position tomorrow.

Hi everyone. I decided to add two long positions (from my 16 stock watchlist) because they presented favorable risk-reward ratios.

I bought YY about 10 minutes before the market close, and it’s down a bit from where I bought.

YY daily chart below. Risk to reward is 1 to 2 ($4 down and $8 up).

I bought MTCH at market close today at $131.48 (daily chart below). I’m also using a smaller position (risk 0.5% to account) because I could get stopped out very quickly. I suspect that this trade will usually take longer to play out (up to 4 week hold), and I’m prepared to average up if price performs well. Risk to reward is 1 to 3 ($6 down $18 up).

Lastly, I will be closing out the rest of my MRO position tomorrow.

Holding MRO for a year has exposed one of my weaknesses. Because I’m usually swing trading with an average hold time of about 8 – 9 days, it’s much harder to watch the market move up and down on a longer time frame (like 1+ years). This is because I’m so used to buying and selling within a week or month.

3/29/2021 Out of half my MRO position (short calls long shares) at stock price of $11.05. Edit: Sold ORCL at profit exit ($71.9)

I closed 10 short calls and 1000 shares of MRO (half of my position that was held for just over a year) for long term gains this morning. The process was a bit more tedious than I thought because the calls were not very liquid right at market open.

I also chose to specify the lots to sell instead of using FIFO (First in First Out), so I would guarantee that the 1000 shares bought slightly earlier were sold. The other 1000 shares haven’t qualified for long term gains yet (off 2 days). If I messed this up, it would have been a disaster because I would be paying short term capital gains taxes instead of long term capital gains taxes.

ORCL surprisingly hit my profit exit at 71.9 so I sold the position.

3/28/2021 Markets at all time highs, previous post highlights changes to BEPC, REGI, PTON, and XLE. 16 stocks added to my watchlist.

Hi everyone, welcome back. Markets went higher this week again, and momentum is still pointed up. However, futures are down a bit, so perhaps we will be red tomorrow (Monday).

Either way, since we are still in an uptrend, I’m going to hold my positions. Earlier this week, I added a stop loss to BEPC, removed my second buy order on REGI, bought a half sized position in PTON at 103.23 and sold my XLE puts for a 44% loss. You can read more about that from the previous post written on 3/25/2021.

There are 16 stocks that look good for going long on, with a large amount being beaten down Chinese stocks. The 16 stocks are listed below, with my favorite charts listed earlier. I will go through 4 charts that I like.

MTCH, NTES, YY, TWTR, BILI, VIAC, BIDU, PRLD, JD, WB, BABA, SQ, TME, VIPS, IQ, FREQ.

MTCH daily chart below.

Price is currently too high if we use the ideal wider stop loss (near 125). However an entry now with a stop loss at 131 (~7 dollars down) – just below the Friday low of 132 – should be good enough. Our profit exit remains at 155, which is a risk to reward of roughly 1 to 2.5 ($7 risk, $17 reward).

NTES daily chart below.

An entry now is decent, but the hold period will likely be longer than my usual swing trade length of 8.5 days.

YY daily chart below.

This one is at a good buy level right now. It’s going to need to not go below the most recent low from Friday (~$92) or I think the chance it continues lower increases drastically. For these kinds of trades, I like going in with a half sized position because I’ll either get stopped out or it’ll hit my profit exit really quickly. Another way to play this would be to use a wider stop (~$86) with a profit exit near $116. Both these trades have a risk to reward ratio of roughly 1 to 2.

TWTR daily chart below. I really like this trade here because most of the recent pullbacks stopped here, but ideally we would be buying near 56. Maybe selling weekly cash secured puts that would result in a cost basis near 56 is a good idea.

Entry now at 61 would have a risk to reward of roughly 1 to 3 (stop loss either at 57 or 58 and we sell at 70). Entry near 56 with a stop loss at 51 also has a risk to reward of 1 to 3. If it drops quickly to 56, we will use a wider stop loss to account for the increased volatility.

I am currently not in any of these positions, and won’t be able to enter all 16 of the stocks I listed in this blog post. I still have a lot of money tied up in ORCL (35% of my account), MRO (15% of my account), and PTON (10% of my account) as well as smaller positions in my Roth IRA. That means I have roughly 30% of my account in cash, which is no where near enough for 16 positions.

3/25/2021: Added stop loss to BEPC, Removed second buy order on REGI. Edit: Bought some PTON in afterhours. Also out of XLE puts.

Markets are behaving much more wildly than I expected, so I’m adding a stop loss to BEPC at 38.5. It was going to be a 1+ year hold, but I may get stopped out sooner.

I also removed my REGI buy order at 58.5, but my stop loss is still at 46 for the other position that I bought at 66 earlier this week. I’ll be glad to add the second part of the position if we get any sort of buying pressure.

Lastly, I’m trying to figure out if I want to sell puts on PTON or if buying shares is better. In the end, it’s probably about the same. For reference, PTON is currently trading at $99.4 at the time of this post.

Edit: I bought PTON in afterhours because I think the upward momentum and risk reward present a good long entry. I have a 5 dollar stop loss ($98.23) and 10 dollar profit exit ($113.23). I’m risking .5% of my account on this bounce trade instead of the usual 1% because I plan to hold it for 1-5 trading days.

I’m out if we close tomorrow down.

PTON daily chart below:

I also sold my XLE puts (hedge for MRO) for a 44% loss. The total dollar amount lost was $112 so it’s not too bad.

Please enjoy the rest of your week!