Did you make this trade in 3D Systems (DDD)? Learn from the pattern and make money whenever you see it again. (April 15, 2016)
I want to look at 3D Systems ( NYSE:DDD ) again. This is the price action from Friday; the reason I’m going back to this is really it’s more of a trading lesson. And basically I’m following up what I said on Thursday. There was an upgrade; I think Cramer came out and he was really bullish on this. I’m not sure if he said buy, buy, buy right here. But my point was that this was a major, what I would call, a climax high. Whether it is ultimately going to be the high for THE stock. Hey, it depends on what your time frame is. But if we’re looking at this uptrend, this channel, you don’t even need to draw this resistance line to get a sense of what’s going on. You just look at this and this is flat top. You get a big move higher, this is what is known as gravestone or a tombstone doji. Otherwise known as an, “Oh crap, I don’t think I should have bought it here,” pattern. Because what happens is the stock closes down. And now I want you to think about this, because we’re coming into some key earnings this week, this coming week and the following week. When you’re looking at a stock like this and it comes out, there’s good news, think, “Well the stock, right now, is reflecting the catalyst, it’s making the move.”
What could there possibly be that’s going to drive even more buyers to want to get this stock at 19.00 or 20.00 or 21.00, when they didn’t really care about it at 15.00 or even 17.00? Do you see what I mean? What possible catalyst could there be that’s even better news? And the answer is generally, you know what? I cant’ think of anything. And in that case what you do is you just back away and let the stock settle out. Now that’s what happened on Friday. This is the type of stock, frankly, that when you see this going into the closing bell. When you see this type of pattern that by then is pretty much complete. When you see this going into the closing bell, go ahead and get off a short, short that stock. And I know for some of you day traders you’re uncomfortable opening a position right into the close because that’s the antithesis of day trading. But this is what you’ve got to do on a stock like this if you really want to make the money. Because you can see the stock gapped down 2.5 percent and then of course it’s down more than twice that before the close.
But the time to take action on this is when possible is actually during the end of the day when this print is being made. And you can actually see a similar pattern, a similar opportunity right here. A push through the 200-day moving average and then a close. I don’t care that, “Oh, it closed a little bit below it”. It doesn’t matter, I don’t care about whether it closed a little bit lower or above the 200-day moving average. What I care about is, that the stock was in an uptrend, a really nice uptrend. Look at the numbers here guys, $7.00, 6.50, $12.00, $13.00. So the stock is up here. And then intraday drove clear up to almost 14.00 and then closed near the low end of the range. So it was a wide ranging day, it was a lot of price action and it was all negative into the close. So you see this 200-day moving average, and well you know what? I think I’ve got to short this stock, or at least sell it. But then the next day, okay, you didn’t get rewarded for that. Fine. But you did after that. And so my point is, a lot of times the best trades are actually opened right at the end of the day. But don’t just say, “Oh, I got a hunch, I’m going to short a bunch, or I’m going to buy a bunch right into the close.” You want to know exactly why you’re doing that. In this case it’s because of this pattern, it’s virtually always going to lead to that.
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