This morning in my MMT notes, I pointed out that Jack in the box (JACK) might give us an opportunity to make a 59-Minute Trade. Well, the stock got my note and gave us what we were looking for. This video shows you just how I traded it. (February 23, 2017)
JACK PLAY YUM MCD JACK
In this video I want to show you how I traded Jack in the Box ( NASDAQ:JACK ) this morning. It is not the perfect trade, I made some mistakes; one of which is liquidating my ENTIRE position instead of holding some just to allow me to have some kind of exposure to the upside. Here is the deal, we will kind of break it down. The company reported earnings. Nasty. The stock opened up down here, about a 10 percent decline. When I see a stock open down that much I think gap and reverse, particularly a stock like this. It has been in a strong uptrend, and hey, who doesn’t like Jack in the Box ( NASDAQ:JACK )? So it just seemed like maybe there was a little dislocation; enough that value buyers or just funds that really think, “Okay, I am going to get this on the cheap,” because we see what has been happening to other stocks: PLAY ( NASDAQ:PLAY ), Yum! Brands ( NYSE:YUM ), McDonald’s ( NYSE:MCD ). So we see that this restaurant sector is a pretty attractive sector.
This kind of sell-off, a lot of traders and money mangers will view this as a great time to buy Jack in the Box ( NASDAQ:JACK ). They couldn’t buy it up here, it was just too expensive. It seemed like, what is the upside? They are looking at earnings per share (EPS). They are looking at growth. They are looking at profits margins. They are looking at a lot of stuff. So their opportunity to buy Jack in the Box ( NASDAQ:JACK ) for under $100.00; Hey, that works for me, right? I started watching this stock first thing in the morning. During the first minute of trading I saw that it didn’t trade down below 93.00. That is a meaningful level to me. What is really meaningful is this: In this first minute range, when it closed and we started the second minute basically at about the same level; in this first minute range the close was SO tight, it was just a little bit, like a quarter of a percent, above where you would put a stop. If you are long the stock and say, “Alright we get this huge volume on the first minute of trading. That is a puke ‘em up, let me get the heck out of this thing.” The most the selling would push it down to is 93.10.
So second bar, the stock opens up here, 94.13, so it opened up a little bit here. So I decided, I’m going to buy some stock. I am going to take a position here and keep a stop really, really tight. It is a day trade. It literally is a 59-minute trade; I teach a course on that, to make money specifically on this kind of stuff. This is just, add to your bottom line by making these types of trades. I am not looking at Jack in the Box ( NASDAQ:JACK ) as a value. Here is the value, it fell down this much, I think it is going to move higher. So I take some stock right here with a stop so that I am not risking much money. Now, I have got a stop right here. I am only risking very little money because it is still plenty liquid. If my stop gets hit I will get filled right about that same price, I won’t get a horrible fill.
So I have set my alert, I have a stop. I want to know if this thing is going to hit 93.00, I just want to know that. It doesn’t. Instead it moves up here. So now it is up above 94.00. I actually add to that position and I put in a new stop, I am like stop crazy here. So I have a stop on my original position down here; I add to it and I have a stop somewhere between 93.00 and 94.00, I forget which, but I am treating this as a separate trade. So I am risking more actually on this first tranche, my pilot buy, and then I am risking more here just because I have already got a built-in profit, I am up about $1.00. And so by keeping my stop here I am risking giving up my entire profit and then some. Then I have got a stop on the second stuff, right down here someplace. But I am okay. I have got my stuff backstopped and this is actually a pretty safe trade. So I didn’t get stopped out of this second, so I must have kept it down here. Again, I don’t remember the exact stops, I am trying to help you understand how you can stay in these trades longer. So I am doing nothing here.
Now this is getting my attention, because the high is 94.50. The high on the initial minute of trading was 94.50. The high here was 94.49, so we are at a new intraday high for this trade. So I added to that. So I have got three adds, I don’t average down; I have got three additions each at higher prices, so I am raising my cost basis, but of course I am profitable, and I am profitable on all of these trades. By the way, I have got a stop on this third add, it is a little bit under 94.00. Then I am watching this stock at $95.00. I have got an alert set, my alert doesn’t fire off, now it kind of does and I am looking at this and I take ANOTHER position. Now, I take another position. I take THIS stop that was down here and I jack it up to above 94.00, somewhere in this range. So now I have got a built-in profit on my first position. I take my second position and my third position and I jack them up to the same level. So now I have got a built-in profit on all of my positions that I have taken here. And IF Jack in the Box ( NASDAQ:JACK ) falls down, then I certainly didn’t want to add to my position, I didn’t want to be long the position.
Again, it is a day trade. It is a morning trade, make my money and I am out of here. If the stock moves up to 102.00, well, I just hope it moves up in linear fashion without me getting stopped out. And I set alerts on the upside so I know, I am looking at other stocks, so I know whether Jack in the Box ( NASDAQ:JACK ) continues to move higher. Because you know what? I may just want to add more. And so I have got my stops trailing, at a profit, and I DO add more. Now I am at full position, I am at a full day trading position. And how much am I risking? Well, on my first three orders, my first three buys, I have got a built-in profit now. If I get stopped out on all of them I am selling all of them at a higher price than my cost basis. And then I put a stop on this last position, so I have got two stops, I put a stop on this last position about right here, I am still on the 1-minute chart here, so I am putting this in. Now I do look at the 5-minute chart just to kind of get a sense of what is going on. Because if you are trading here, in a 1-minute chart, things can get pretty granular. And so we are moving up, it gets up to 96.00 and now I am looking at this, so we have got a 10 percent decline. Now we have got a 7.5 percent decline. So this stock has filled some of the gap, but not all of it and I am still moving.
I am not adding here because it is 9:47, I have already got a pretty good position, I don’t want to stay in this trade too long so I have got my stops elevated a little more and they are stair-step stops. In other words, again, I am on a 1-minute chart, I see that the stock can oscillate, I don’t want to get stopped out of my position on one little jig of the stock. But I don’t mind getting stopped out on a third of it or a half of it, and that is actually where I did, I got stopped out on half of it, but I kept the rest of the trade going and I was happy that I did. And by the way, when I got stopped out of it here, half of my position, what do you think I did with the stop on my remaining position? I have about 8 changed or canceled stop orders on this stock because I was protecting my profits.
I looked at this and the low was 95.54, I think I put it at 95.40 or something. And, “Oh, there is support right here. Why do you want to do that?” Hey man, I am trying to make money, not be right. So I am managing my risk. I have got a stop down here on a position that ultimately, “Gosh, I wish I had kept the whole thing.” But I made a profit here, and I am not trying to get rich, I am just trying to get paid. So now the stock falls down here and I am out. Because as it rallied up here, when it fell I exited, I actually did set a stop, I just let the market take me out. I think I raised it to just a little bit under 96.50. So what has happened to the stock? Well I may consider buying this thing back, but lets look at the 5-minute chart. Yes, I may consider buying this thing back because it is actually entering a new high zone. This could ultimately run clear up to $100.00. Because looking at it on the 1-minute chart, it is coming out of a volatility squeeze; you look at it on the 15-minute chart and the stock is still kind of continuing to run. But I am not going to do that because I think most of the money is probably in the trade, and also I am doing this video.
So anyway, what I have described here is how to make an entry on a trade that is moving higher. And then continuing to increase your position size without increasing your risk. Because what you want on a stock that is moving in your favor is, you want the biggest position possible and the lowest risk possible. If you have got a HUGE position and you don’t have a stop in, you don’t have an exit plan, then you are actually taking a HUGE risk, because you don’t have an exit plan. You have got a big position. An adverse move can kill you because now you are emotional. But if you are gradually increasing your position and you are backstopping each position with a stop that defines your risk. AND as the stock works in your favor and you start increasing your risk you are also looking back at the earlier purchases that you made and you are raising the stop, ultimately to start locking in a profit. And then you lock in more profits and you take more stock. You increase your exposure all the way up lowering your risk. So as this stock moved up my position got bigger and my risk actually decreased. That is the way you want to be making these trades.
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