OKTA caught my eye on Jan 22 when it hit my high volume scanner on Finviz. It’s had less than a year of trading (April 2017 IPO) and I’m particularly intrigued due to the range that it has been trading within since September. For the past 5 months OKTA has been bouncing back and forth roughly between 25 and 32. Most recently, in January 2018 OKTA had a high of 31.19 and I went long today on the break above and was filled at 31.20. My thesis is that it’s making a new monthly high which is the first step in breaking out of the narrowing monthly consolidation, and therefore should continue going higher. From here, I am targeting a move to approximately 36 and using the 28.8 area as my stop, roughly a 2/1 reward to risk ratio. If the trades is a loser, I’ll lose X and if it’s a winner I’ll make at least 2X. OKTA does not offer a dividend and earnings appear to be either the last week of Feb or the first week in March.
Interesting day in the markets again today trading in a wide range with the SPY gapping down nearly 4 points to open at 259.94 and close 9 points higher near the day high above 269. The market seemed to be bracing for the worst and we opened lower there were quickly buyers stepping in to drive prices higher throughout the day. It actually gave the feeling that the market wants the selloff to be over. From a technical standpoint, it’s not unrealistic to have support where there was previously resistance, using the 259 area from November in the SPY for example. Nearly a 10% correction in the matter of a week. Certainly isn’t pretty, but would be acceptable to carry on from here and grind higher to continue the bull market. As usual, I’ll be observing and letting the price action play out and decide which way it truly wants to go.
And as expected following yesterday’s after hours trading, the XIV Inverse VIX ETN got destroyed today and lost 92% of its value. I have no intention of ever getting involved in one of these VIX related ETF/ETNs, much less an overnight position. If you’re day trading and use short term momentum then it may work for you, but for holding overnight and longer term it seems like a potentially lethal move as seen today.
And my trading plan remains the same, let the dust settle and continue to search for high volume weekly breakouts. Currently hanging onto ORIT from 16.75 and ERF from 10.41.
What an ugly trading session today and a miserable start to the week. Last Friday’s trading session was an indication of selling pressure picking up with the SPY closing beneath the 8EMA on heavy volume as seen below.
Today’s session opened lower and continued going lower throughout the day, with a flash down happening around 3:11pm followed by a slight recovery only to find stocks settling at or near lows into the close. Some Dow stocks like AAPL and INTC were green in the morning and by the afternoon became red like the rest of the average. The S&P closed -4.18%, Dow Jones -4.6%, and Nasdaq -3.78%.
This brings the overall markets trading back where we were in the first week of December. Not the end of the world, just retracing a couple months of action. After all, with double digit % gains in 2017 it has to be expected to enter a correction, I just don’t think anyone was expecting such a sharp pullback less than two weeks from making new all time highs. Am I saying the selling has stopped? Absolutely not, in fact there was lots of chatter on Twitter today about the XIV Inverse VIX falling 14% intraday and then absolutely crashing after hours over 80%. Ouch. Some speculating that there could be further selling into tomorrows session as a result.
As I’ve only been trading stocks for a couple years, I can hardly recall a day with such heavy selling and fear in the markets as today. Maybe the flash crash in Aug 2015? At any rate, I’m not going to let the noise from today interfere with my strategy: buy multi week/month breakouts forming on high volume. I’m currently holding two stocks, ERF and ORIT, and will respect my stop price if it touches. In scanning for new positions, I think it’s important to be more selective with overall market conditions more volatile right now and consider position sizing a bit smaller until things level out a bit.
Bought shares of ERF today at 10.41. Discovered the stock after yesterday’s high volume breakout above the 10.20-10.30 area. Over the past 13 months ERF has approached the area a number of times and pulled back. Yesterday it broke above the resistance area and did so on 2.7 million shares volume vs a 10 day average of 870k. So at this point I at long from 10.41, will consider adding some more shares on a pullback into the 9.60 range, targeting 14+ to take profits and using 8.2 as a stop loss.
Refresher: What to look for in 2018? Multi week/month breakouts like the ones below.
Successes from 2017:
TRP – high volume breakout
PLCE – high volume breakout
VOD – high volume breakout
What’s the next one?
SD – high volume breakout in progress
OTEX – high volume breakout in progress
LULU announced positive earnings after hours on Wednesday 12/6 and with the stock surging on Thursday I sold most of my position, about half on the open at 73.23 and a quarter at 72.10. With my original target around 71.50, anything at these levels is icing on the cake. Looking to close out the position on continuation to the upside or if it breaks below Thursday’s low of 71.29.
I’ve been holding LULU since October 23rd when it broke out of the 4 month range of 56.56 and 63.86. Initial buy was at the price of 64.24 and then added some on November 2nd at 60.89 for an average price of 63.15. In planning the trade, I targeted approximately 71.50 to take profits and using 59 (low price of 10/18) as a stop.
LULU ended the trading day today at 66.36 and is scheduled to report earnings tomorrow, 12/6/17, after the bell.
QCOM (still fresh in my mind from some nice profits in February) caught my eye after Friday’s trading session for having unusually high volume and what looks to be a potential bullish reversal signal. The stock transacted over 34 million shares versus a 10 day average of 14.4 million shares. Also worth noting the monster intraday reversal with the stock having a significant gap down opening at 51.80 (Thursday’s closing price was 53.21) and a brief selloff down to a low 51.05 which occurred about 10 minutes into the trading session. From that point, the stock began to climb higher for the remainder of the session and close at 53.74. [The volatility for QCOM in Friday’s session seemed to be caused by news which broke premarket regarding the company revising down on its forecast due to a lack of licensing revenue related to an ongoing legal battle with Apple.] If QCOM continues higher on Monday and breaks above Friday’s high of 53.95, I would be interested in opening a long position around 54.10. From there, looking for the stock to make a run towards 58.67 which was the high from 1/23 and also where the stock found resistance in mid March. On a pullback below 53 I would look to add more shares of QCOM as the area around 52.70 has provided support on a number of occasions in January, February, and April. Friday’s low of 51.05 would be the stop area, which also represents the low of 2017. Based on these levels I am looking to position size based on two possible scenarios: 1) If I buy only on the initial breakout I am risking about 1% (portfolio) to make about 1.5% and 2) If I buy the initial breakout plus the pullback I am risking about 1.5% to make 3% and thus achieving my goal of a 2/1 reward/risk ratio.
This trade could potentially catch the next QCOM dividend as it goes ex div (0.57) on 5/26. Earnings out of the way until 7/19.
Got stopped out of CROX and WETF today. At least we have the long weekend to regroup. Happy Easter.