Here’s the long and the short of our Salesforce.com (CRM) trade. (November 28, 2018)
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I want to review my Salesforce ( NYSE: CRM ) trade idea from last night. Salesforce ( NYSE: CRM ) had reported earnings. The first move was down, that’s typically the wrong move, and then the stock traded up after hours and this 137.90 level was where the stock had peaked last night when I was doing the video. My line of demarcation was, if the stock is above 137.90 then, kind of, all systems go and it’s a gap and run. If it falls below that level then it’s probably something that you wanted to short and I suggested waiting for it. That was my take on this as the stock was trading after hours yesterday.
Let’s look and see what actually happened today. I don’t know how many but several, we’ll say, traders in the forum made some good money on this. This is how that worked out; I’m showing you this because we actually got two trades here. The stock gapped up; it kind of frittered around here for a bit but generally speaking it was a pretty good short right away. I think I shorted it around 137.00ish, not the best entry, maybe 137.50 but I got off a decent short then added to it a little bit more.
I am just talking about this trade not how wonderful my particular trade was, some are some aren’t. But you get this big gap up and then what you are looking for is evidence that there is enough buying interest to take this stock higher. And if that’s the case you are saying, “Well, I’m not going to short that stock.” But when you don’t see it then you say, “I get it. Traders are selling into this strength.” There have been a lot of folks holding this stock and they are taking advantage of this 10 percent move, or whatever it was. So they are selling, you are shorting.
Once you have shorted and the stock starts moving in this direction, guess what you are doing now? You are looking at the clock; you are doing a 59-minute trade. That’s just the phrase that I coined for trading in the morning. The big moves in stocks are generally over before the first hour of trading is done. It’s not like they are going to magically end at 10:30 but they generally don’t end at 10:40 or 11:00. They will generally end at 10:30, 10:20, 10:00, maybe 9:50, I don’t know.
What I am saying is, your window for making a trade in the morning is literally the first hour of the day. You’re welcome to backtest it. Look at a stock that gaps up 10 percent at the open. Short the stock at the open, close it promptly at 10:30 the same day. What kind of results does that net you? My bet is, you probably get some pretty good results.
So this is how you are trading the stock: You short it into the opening rotation and then you cover it on the clock before 10:30. But then you don’t just walk away from the stock, you go ahead and see how the stock is trading here. And maybe what you do is, you set an alert after the first move down, this move up here to 134.87. So maybe you set a price alert at 135.00 and then you get on with your day. And then, lo and behold, the noontime hour comes and your price alert is hit at 1:35 and you say, “Wow, okay, all the selling is done. The stock didn’t go down to fill the gap. In fact, it squeezed. Now, I am going to go ahead and take this trade to the upside.”
So you are long the stock and once you are long the stock you literally don’t have a reason to get out. So you have shorted at the open. You’ve covered, you’ve gone on with your day. You are back in. When you price alert is hit telling you that the morning selling has run its course and now the buyers have the stock. And then you just hang onto the stock and you are up a few percent and that’s all she wrote.
Now, for tomorrow, I would say this, if the stock moves up to a new high, let’s say it moves up to $141.00 or so, this stock is probably going significantly higher because this is kind of a hammer pattern. Typically you look for hammers that are way down here. This is kind of a continuation pattern. If this stock moves above 141.00 I think you could buy it for another trend to the upside.
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