OK, make sure to check out tonight’s video on TripAdvisor (TRIP). I just learned some heartbreaking news that I reveal about 30 seconds into the video. (February 15, 2018)
TRIP SEDG TRIP SEDG TRIP
I want to look at TripAdvisor ( NASDAQ: TRIP ). I this mornings Morning Market Thoughts I mentioned TripAdvisor ( NASDAQ: TRIP ) along with a couple other stocks that were gapping up big time. I go into this in the Strategy Session; one of them went this way, a gap and run. TripAdvisor ( NASDAQ: TRIP ) gaps up hugely, bigly, 12.5 percent. SolarEdge ( NASDAQ: SEDG ) gaps up bigly as well, like 13 percent, something like that.
Let’s look at these two on an intraday basis because typically when stocks gap up so much the textbook trade is you want to short them. When they gap down the textbook thing is you want to go long. So here you could make this short but you had to be really patient with it. What I do in what I call the 59-Minute Trading is, I wait to see which way the stock goes. It is 59-Minute Trading for a reason other than the fact that 60-Minute Trader domain name was taken.
The stock gaps up, you wait for the stock to see which way it goes. Which way it goes at the open. So, in this case, TripAdvisor ( NASDAQ: TRIP ) gaps up, trades down. So you are saying, “Okay, well I want to short this stock.” It keeps moving down and you are feeling pretty good about it but then it stops, so you have got to be careful. The stock keeps moving and at almost 9:45 the stock runs up. So you are scratching your head going, “Well, do I short this pig or do I go long? What is going on?” And so maybe you are out of the trade.
It finally peaks here but of course, let’s be real, you don’t know that it has peaked. It looks to me like maybe the stock can keep going. You look at the volume; trading volume is running up here. See the market, the overall market is doing pretty well. Look at SolarEdge ( NASDAQ: SEDG ), it is doing well. You were thinking about shorting that thing. That wouldn’t have worked out too well so maybe this TripAdvisor ( NASDAQ: TRIP ) short is one that you don’t want to take.
Now you see this here, so here is the analysis: You look here and this is what I see, $47.00 is now the line in the sand. The stock gapped up, traded down, went to a higher high, which TOTALLY negates the shorts. Anybody who shorted here on anytime during the first minute, they are losing money. Not by a lot but they are losing some money. And so now that the stock rallied up here twice and then it fell off again, now all of the sudden everybody is happy.
You have got to be looking to the short side. But the way you protect yourself is, let’s say you are shorting right here, the top of the stock for the day is up about 3 percent, not even that. So you can short this stock comfortably and put in a buy stop at like 47.10, barely above this intraday high here. The stock still hasn’t fallen out of bed. It still hasn’t fallen to a new low or anything but it is below the opening gap. But the most important thing is you have your clearly defined risk.
This is the important point: It is defined in a logical manner. In other words, you are not saying, “Well, I will only take a $1.50 risk and then from whatever price I get filled at.” No! You are looking at the chart and you are seeing that twice this stock went up to $47.00 and it was sold; $47.00 again, Oh! 47.02 and it was sold. So there is plenty of supply at $47.00. So you are going to short this stock under the assumption that any return to $47.00 is going to be sold into as well.
So you have got your stock shorted; your stop is not at 47.00 it is at 47.10, something like that. You see the stock retraces a little bit, now the stock is down here so you have got a pretty nice short going off. And then the rest of the day is the rest of the day. By this time, by 10:30, you are kind of looking to get out of the trade, which is why I call it the 59-Minute Trader as opposed to the 129-Minute Trader. Then the stock ultimately bottomed and then you don’t want to be holding it through the lunch hour. Why do you want to do that? It is not really trading anyway; the volume is bad. So you are shorting the stock. You have got a clearly defined stop and you have got a pretty nice chunk of change off of this thing.
Meanwhile, by the way, all of your other positions are working because you are not shorting your entire account, are you? This is one way you can be making a little extra money on the side. It all starts from a gap that you don’t know which way is going to go. So you can have a plan but that plan often time tends to work just as long as the opening bell has not rung. Once that happens you are just kind of winging it. I hope this helps; just try these intraday trading moves as long as you have clearly and logically defined stops.
Free Chart