Thinking of daytrading? Check out my trade on Broadcom (AVGO) today. I’m walking you through the whole day! (July 12, 2018)
AVGO CA AVGO
In this Chart video I want to look at Broadcom ( NASDAQ: AVGO ). This is how the stock looked yesterday on Wednesday. And then before the open today it is reported that they are buying CA ( NASDAQ: CA ), which is Computer Associates ( NASDAQ: CA ), and then this is what the stock does: this one goes up here, right? I think that is Computer Associates ( NASDAQ: CA ), I’m not sure. And guess what? It doesn’t matter, the ticker is CA ( NASDAQ: CA ), that is all you need to know.
I was looking at Broadcom ( NASDAQ: AVGO ) this morning and I really just felt like this could be a good Hour of Power trade but not right at the open. I was looking at it right at the open, I had to run back to my desk from getting a cup of coffee, right? So let’s look and see though, how this stock traded.
I am watching the stock first thing in the morning (this is a 1-minute chart) it stays above $200.00. I am waiting to buy it and my idea is, if this is the open here at 207.00, something like that, then I need to see the stock trade above that level. Because that would be the confirmation, that would be the signal that most of the selling is out of the way. Because when all this supply hits the stock, look at the volume, all this supply hits the stock it drops down to a level where buyers are, right? Well it still keeps going lower so there are still buyers for the stock otherwise it would be zero but they are not as aggressive as sellers so sellers are still there.
Now, volume is very light on the second minute of trading but they are still overpowering the buyers; probably a lot of buyers like me who are sitting there waiting, waiting, waiting for their chance to buy. So I am sitting here waiting and waiting; it can seem like a pretty long period of time when you just really feel like, my gosh, the stock is down 15 percent. I know they are buying somebody but that’s a big move. And so you are waiting, you don’t want to miss it.
Well, this is when rule-based trading comes in to play. I am not even THINKING of buying this stock until I see a green box. As long as I see solid reds here that is telling me that at the end of every minute the sellers were more aggressive than at the beginning of that minute because the stock kept going down. So I need to see a reverse there.
Now I see this and we are getting close. I think this even went lower. And I remember posting in the forum; I am waiting. It is testing 200.00 and then now this gives me a sense, volume has actually picked up so this could be kind of like a selling climax here. Pretty substantial volume, this is when I look to get in, right here. There is nothing magical about it. I don’t have any big powers of trading to know exactly when the bottom is, not at all.
My idea is this: The stock opened up here so that is when I know the bulls are in charge. Well that is up here, this is down here. I would like to take a starter position somewhere. If the stock IS, in fact, going to move up above the opening print, it is at 200ish right now. Well I don’t want to sit here on the sidelines and let the stock move up 3.5 percent, which by the way, if you are doing a day trade, which was really what I was looking for, 3.5 percent is a pretty big chunk of change. I don’t want to sit there and do that. But my rule is I wait on something like this, before I am even going to start a position, I wait until I see an obvious change in character. Dark red, open green, that is the obvious change in character, I’m in. Somewhere around here, 290.00, 201.00, I forget where my first buy is.
The other thing that made me feel good about this was this intra-period low of 197.76. This was 197.46; 20 cents, not a big deal but even if it was a penny it tells me that most of the selling pressure, at least as of now, this is 9:38, we are 8-minutes into the trading day, it tells me that most of the selling pressure, as of now, was right here. So I can take a starter position here with a pretty tight stop, like less than 2 percent, I can buy with reckless abandon and I did. Actually, I didn’t buy with reckless abandon but I bought a pretty good chunk of stock and I kept a stop right there. Again, it’s not like Mr. Super trader, it is just having rules.
Now, during this move here am I getting nervous? No, my stop is in. My stop is in. I can’t sit here and micromanage the stock. I don’t get a vote. I do not get to vote on which way the stock goes. See how it is sitting here? Right now it is 9:45, the first 15-minutes of trading and the stock is BELOW where the opening print is. Not exactly a textbook bounce but my stop is in place. Frankly, I’m on to trading Amazon ( NASDAQ: AMZN ); I’m looking at other stuff. My stop is in place and right about now I have got an alert set somewhere around here, below 205.00. I have got an alert set here, 10:00; we are finally starting to see something here. Ticking out of a volatility squeeze on a 1-minute chart. Buying more, right here. Buying more, where is your stop? Well, if you leave it alone even, now you are risking less than 3 percent.
So do you see what I am getting at here? The stock has traded sideways for so long it has gotten absolutely crushed because they are buying a company. And companies that are buying other companies tend to go down until they come back up. So this has been a total no fuss, no muss trade. I am buying more and I am buying more, then I am kind of done buying. Even though the stock is not yet even above the opening print, which is typically where I would want to buy.
The reason that I am not buying more is because I have enough. I have a pretty big position at this point, with a really tight stop on it. And so, even though I have a pretty big position I don’t have that much risk. Because if I have a stop in place, think about this, I don’t have to risk a gap. The stock is not going to gap through my stop and I am going to get hit, that is the overnight stuff.
But if you are trading a stock that is liquid and it is a day trade, you can set your stop, you know exactly what you are risking, and then if you hear a ding, okay you get stopped out. You know what the outcome was because you predetermined what your loss was. You don’t get to know how much you are going to make but you can darn sure define how much you are going to lose. And as long as you are okay with that then the only thing you are doing is setting alerts on the UPSIDE to let you know when the stock is really working. Because maybe you might want to raise your stop or you might want to increase your position size.
Again, keep in mind; this is still almost an hour into the trading day. Typically the big moves are done by then. Here, we haven’t really got started so there is still a lot so selling pressure here but obviously not as much. Now the stock is up at 206.00 as opposed to 200.00. Now you can see, we are an hour into the trading day and you see what is happening here. So this has just been like this no fuss, no muss trade. A 1-minute chart and it is just gradually ticking up. Here we are after hours.
The reason I walked you through that was because I think it is a GREAT example of how you can take a pretty big position in a stock without taking a pretty big amount of risk. In other words, you want to put yourself in a position to make a lot of money. But you don’t want to put yourself in that same position to lose a lot of money. And so this was actually a trade that worked out really well because I didn’t have to risk that much money.
Now tomorrow, the stock traded today at 210.28, right? That was the high. Guess where I would look to buy? I would look to buy around 210.30. If this stock trades above 210.30; I will set my alert to “buy some stock”, so there you go. So that is how I would be trading the stock. I hope that just walking you through this has worked for you because these are the types
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