Here’s the trade we did on Twitter today. (April 23, 2019)
INTU TWTR
I am looking at a couple of different stocks here today.
First of all, Intuit ( NASDAQ: INTU ); I talked about this yesterday in this Chart of the Day, noting that this was one of those software stocks that was, not really left behind, the stock has done pretty darn well, but it really hadn’t gotten as much attention as some of the big guys. I was looking at this setup and felt like this was a pretty good setup and it turned out to be. The market is up today and this is up 1.5 percent, $4.00. So that has turned out to be a pretty nice trade and I would just stick with it. Once the stock hits 270.00 that’s when you have to play closer attention because now it was up here at this high last time and this high is the top of the stock until further notice.
In other words, you have to look at this and anticipate that the resistance is going to hold. That doesn’t mean that you sell the stock when it hits 270.00, it means that you are watching it, you account for it, maybe you raise your stop. Maybe you might sell a little bit or you might say, “Dan, I am not a 3-day trader, I am a longer-term guy. I am just going to stick with this.” And I would say, “Hey man, fine. The stock looks like it has had a nice little breather here for about 6 or 8 months and now it is on the next leg higher, it totally works.” The point is, you really need to look at your time frame; like what is your time frame? And so if you are just looking at short-term this is like a 2-day, maybe a 3-day trade.
If you are looking at Twitter ( NYSE: TWTR ); I was in the forum this morning and I noted this in my morning note, that the way this thing was gapping I thought that this could be a good trade for us and it turned out that it was. Look at this, the stock opened at 36.93; it traded down exactly $0.02, literally $0.02. And so if we look and see how the stock traded it jumped right from the get-go and I think that some people can get left behind. Because you see, I would expect, it seemed like it was trading about 5 percent pre-market, but then it opens up 7 percent. And then when it doesn’t pull back I think a lot of people can get left behind.
What you have to understand is, you are not making money on guessing. You are making money on managing risk. And so when the stock doesn’t turn around right away you can’t decide what the stock is going to do. You can only decide what you are going to do and then hope that the stock goes straight up to the moon. But here, if you are not buying right at the open, and I always suggest waiting at least a minute, then you are buying, whenever, right up here even, you are buying at 38.00 and you are good. And then you turn back around and you keep your stop here at the open, a little bit below where the opening print was, and then you just let her all hang out. Just say, Okay, I’m in the stock, maybe you are in it here, you’re in it here, maybe you are in it here. Maybe you bought this dip, heck, maybe you got stopped out here, whatever the case may be. The stock trades sideways, and look this is a 1-minute bar chart so this is exactly 10:00 here, this is 9:30. The stock trades sideways for about 10-minutes or so and then it breaks out above 39.00 and just keeps on going.
This is the type of trade where you could have gotten in right away if you had a good risk management strategy, which is, okay I see the gap, the stock didn’t trade down right away. That means that it’s probably going up for another reason, which I will tell you about in a second, remind me, and so you see the stock is up here. Now it is the second minute in and it’s trading here when you are thinking, Wait a minute, I can’t buy this stock now because it is “up so much”. Don’t be thinking about that. Say, If I buy the stock now what is the risk? My risk is this, I am not putting my stop down there, that’s a big risk. No, I am putting my stop right here. Suddenly the stock is up here, it’s gapped and it is starting to run, I am buying the snot out of this stock because I am not risking that much money. If the stock reverses, yes it’s a losing trade but it isn’t the end of the world. At the same time I am seeing all of the other things that are happening in the market where the overall market just keeps going up and so this turns out to be a pretty good trade.
I just mentioned, a minute or so ago, that there is another reason why I would be buying the gap more forcefully and this is it: You see where the stock, last July when they reported second-quarter earnings, the stock gapped down here from here down to here or something like that and so there is like this air pocket right here. And then we have something like a 9-month base. And so what happens? The stock gaps right up to the BOTTOM of this void, where the top of the stock was here, this is where the stock opened up. So right here in this void, this is where it is like a no man’s land. As the stock moves up into this void you are going to expect to see some selling pressure but it is actually fairly light relative to the buying pressure. And here’s why: Because everybody that has bought down here, frankly, this is what you’re waiting for. You’re waiting for the stock to move up and start paying you off. Meanwhile, everybody else who is interested in Twitter ( NYSE: TWTR ) but they are waiting for the big sell-off so they can buy low, now they are scrambling, they have got to get this stock.
What I am saying is, from a technical perspective this is stock that was setup to not just gap, any stock can gap, but to gap and run. If the stock gapped up it was set up to run further. One of the things that I coach my members to do is this: If you are taking this for a trade, a swing trade, fine, get out today, this is a nice move, jump in at the open, you make a few bucks and at least you can buy beer for tonight, it’s a good trade. But try to get used to hanging on to stocks for longer than you might normally do.
A stock like Twitter ( NYSE: TWTR ), I don’t know what the fundamentals are, I don’t really care. If a stock gaps up like this, it’s a popular stock, even the president of The United States uses it. I don’t know if you were aware of that but it’s true. With this kind of stock, this kind of following, if this starts running above $40.00 this could really go. So try to get used to hanging on to a small amount of shares and what you will find over time is that you are better able to do that. I am telling you, the money isn’t made in the buying and the selling. The money is made in the holding part.
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