Bear Bull Traders Trade of the Week September 18, 2020

Climactic Reversal

Counter-trend trade based on VPA that often occurs at the top/bottom of trend.

Time:

  • Any time of day

Indicators:

  • Stock is in play.
  • Clear intraday trend.
  • Should be in the accumulation (bottom) or distribution (top) phase.

Confirmations:

  • Climactic volume on the 1 minute and/or 5 minute chart. Should be 3-5x normal volume. Should be extremely obvious.
  • Ideally candlestick anomalies, such as high volume hanging man, hammer, or reverse hammer.
  • Ideally, the climactic volume should be slamming through a key level and then reversing right back.

Entry:

  • Candlestick immediately following the climactic volume

Stop Loss:

  • Low/high of day. Size correctly, do not stop out early¬†unless very¬†clear signal.

Target:

  • 25-50% off at 2-1 r/r
  • 25% off at VWAP or nearby support resistance.
  • 25-50% until a reason to sell

Rules:

  • Do not chase an entry. If the r/r is not in your favor, do not get in the trade.
  • Do not take trade if spread is unreasonable. ($0.2 for low priced stocks, $0.75 for higher priced stocks)
  • Avoid stocks over $500

Trade management:

$CCL was on my watchlist because it was gaping down on volume after being strong the previous few days. There was a big rotation from tech stocks into the travel sector such as $CCL, $NCLH, AAL, and DAL.

The stock was very weak into the open and formed a distinct downtrend. This really caught my attention because after a few strong days previous, it was a great reversal candidate.

Climactic volume appeared when it broke the low of day and a significant daily level. I took my entry right after that climactic candlestick closed.

  • I took my first partial at 2:1 r/r (also happened to be at the top of a range).
  • After taking first partial, I moved my stop loss to break even.
  • Took another partial at VWAP/nearby support/resistance.
  • Hold the rest until reason to sell.

Once $CCL could not hold above a significant resistance level, (200 SMA combined with the premarket low), I decided to get all out because there was a good possibility it would come back to my break even price and stop me out of the trade.

Below is the trade on the 1 & 5 minute charts: