TSLA trade a 2d-2u reversal

In early April, my trading account was around $350. Over the last few weeks, I have been practicing The Strat, and I found my way to Jim Bradley. I had a solid start, and I have decided to share my trading here.

Today I made two trades in TSLA, one netting 8%, and the other netting 13.5%. I usually try to limit myself to that one perfect trade, but TSLA was moving so nicely that I could not resist :).

Here is the analysis:

As always, I zoom out to see the story of the higher time frames to determine bias. This will define the direction of the trade I'm expecting to make for the day.

This was the tsla chart about half an hour after the open. The monthly and weekly inside candles were negatives to me, but I loved the daily chart. TSLA was awful yesterday. But it turned around and finished the day as a hammer. As the stock crept up, I was watching for the 725.4 mark, which was yesterday's high. This concept is something that Rob explained very well in his StratTime report from 4/14 on AMD. The second that we hit the previous day's high on a bearish 2d like that, we are knocking out a hell of a lot of shorts.

Let's zoom into the 1min chart of the first trade:

 (the image is not so great, but if you'd like to pull up your own charts that is the 9:35 candle)

Beauty. Any "stratter" recognizes that. Poke the high 2u, poke the low's 2d, hammer-counters-shooter, and BAM. Next candle opens at 722.8 and closes at around 726.88. So this setup was not hard to explain. But I want to express something that makes investing in the 1-min candle charts so much tougher. The easiest question looking at this chart is: There was a Momo hammer at 9:32 am! How did I know to avoid that, which would have resulted in an entry of 720.91 and close 721.08 based on breaking the low of the 9:34 candle, and choose the other Strat formation?

First of all, in the world of trading, nothing is absolute :). The stock could have gone to $1,000 for all I know. But I stayed away because there was no break of a candle low. As I have said in multiple posts, it is so important to break out the mechanics of The Strat. Yes, that pattern was a 2u-1-2u, but the most fundamental concept behind the Strat is to determine the aggressiveness of the buyers versus the sellers (and their stops). TSLA opened the day up green, and it kept going for the first 5 minutes. There had been no break of any previous candle lows on one of the smallest timeframes. It was difficult, as explained above, to say the buyers were for sure stepping up while the stock was still an inside candle of the previous day (It needed a break over 725.4). So you have to ask, Where are the shorts? From all of my previous scalping experience, I'll tell you where :). They are waiting for the first break of a 1-min candle to the low, and they are jumping in, betting on this going down again like yesterday. So I waited for the first low to occur, let the shorts load up, and then I'll jump in on the first Strat continuation pattern I find.

The second trade was also another Strat classic, a pivot machine gun at $730.

Stock pushes past 730, and you can see the shorts slowly start piling back in, betting on resistance at 730. Wait for them to dry, attain equilibrium with the inside candle (and therefore, as explained in a few previous posts, have naturally created a tight, sensible stop on TSLA, which many do not find easy), and flatten my trade at 735 a minute after the break.

Trades

Positions

Account

Because my account is very small, I have to trade pretty far OTM calls, which means they have low delta.  With a bigger account, or trading shares instead of options, being so right would result in larger p&l.  But right is right, and this was a nice ROI for my modest account.

Video below:

As always, just a few shameless plugs for Trade Unafraid :)

1) For anyone seeing the video for the first time, please note how I have automated an updating trigger on any break of the previous 1 minute candle, and based on that trigger, I am trading an option. Which option? The one with the tightest spread that will result in a qty of 2-5 in the whole chain. Does your trading platform do that? :)

2) At around 1:40, I hit the close1 button, which will simultaneously cancel my nearest resting order and replace it with a new order at the current price.

 

3) At the exit at around 2:35 into the video, notice how the bid ask price 1.95-2.04 at the time. While most scalpers have to trade at market to get out fast enough, Trade Unafraid can try work the order and get a fill in between the bid and the ask. Result: my fill was at 2.01.

Second Trade:

The material and results shared in these posts are made possible by using Trade Unafraid. Trade Unafraid evaluates personalized criteria and selects the most favorable option, allowing traders to come out on top. With a “hands-off” approach, Trade Unafraid intelligently navigates the bid-ask spread and gives users the power to place “conflicting orders.” By fully automating trade entries and exits while still allowing you to manually override anything, Trade Unafraid compels user discipline and adherence to strategies. Please checkout TradeUnafraid.com

Shoutout to @RobInTheBlack. I will never see another chart again without seeing #TheStrat. See More. 

And, shoutout to @_JamesBradley__ whose approach to trading has made a tremendous impact on how I trade. See More.