Want to see how I traded DropBox (DBX) today? Let’s look at VWAP and Pivot Point analysis. (June 28, 2018)
DBX
I want to look at Dropbox ( NASDAQ: DBX) today. We are going to look at it in a little bit different chart here, intraday, to show you what I did today. We are going to look at this in the context of pivot points and volume-weighted price for intraday analysis. I am just telling you, this is stuff that you really need to know; this stuff can make you money.
Before we even get to today though, this is how Dropbox ( NASDAQ: DBX) looked yesterday; a complete retracement of the earlier breakout from a squeeze in the middle of the month. The Bollinger Bands were less than 6 percent wide, that’s a pretty tight squeeze. So you get this big breakout out. Fine. That was then, this is now, a lot of pain all the way down. And so, if you are a technician, if you look at charts, this was the breakout level right around there. So when the stock falls back to that same level and the 50-day moving average; I am not really sure that I would have bought this on Wednesday, maybe I would have, I have done that kind of thing before but I certainly didn’t do it on this one.
The idea is, after this kind of pullback, this is a really steep downtrend, it is a high activity stock, we will put it that way, a recent IPO as you know and you know what Dropbox ( NASDAQ: DBX) does; over 5 million shares traded. So we are looking for a rebound and then, sure enough, boom! That is what we get today. It actually gapped down slightly. It opened just a little bit lower and then immediately retraced. So we will look and see how we can check that out; how we can trade around that on an intraday basis.
This is how it looks: The stock gapped down. The pivot point was up here, around $32.00, close to $32.00. The stock traded lower this morning; below the pivot point, below the average price, which is this orange line here. And so this is a stock that if you bought it you would have been pretty aggressive but it would have actually worked, this trend notwithstanding, I am not talking about that; it would have actually worked if you bought it somewhere around in here because you have a frame of reference, the initial sell-off, the initial trade down that ultimately reversed. Once you get a sense that the intraday low has been hit and I will say, like the intraperiod, the 5, 10-minute chart low has been hit and the stock is up. We don’t know whether this is going to move higher or whether it is just going to be a little oversold bounce and then the stock is going to kill you.
What you do is, you look at this and then as soon as the stock starts rebounding off of 30.75 you could say, “Okay, I am going to be aggressive. I am going to start looking at this stock. I am going to buy the stock but I am going to keep a stop below this morning low. Because if the stock reverses on me I don’t want to be holding this thing to 25.00.” And so you are in here. But for me, my rule is, I don’t want to be long, I don’t want to buy a stock if it is below the volume-weighted average price. I want to buy it when it is above the volume-weighted average price.
So you could have been really aggressive and bought here. I would have waited and I would have wanted to see the stock start to trade above this line and stay there. I am looking for support at that VWAP. This VWAP is the average price by volume and so the stock is above it and every time it pulls back it rebounds. It tells you that there is buying and this is exactly where the buying is, right here at 31.40, 31.50. It is EXACTLY where the buying is. So I am feeling comfortable buying the stock here.
First thing in the morning, again, it is a little bit riskier trade but that is definitely a way to go. THEN the stock trades sideways. Now it is still below this pivot point here of $32.00, which is based on the prior day’s range and then by noon this is squeezing. It is in a pretty tight intraday squeeze ABOVE the volume-weighted average price.
So then once the stock starts breaking out of this squeeze and NOW it is above the pivot point, see, it breaks out of a squeeze, pauses a little bit and then, boom! Right here is the breakout. That is when you are adding to your position. So you are buying the stock here. Feeling pretty good about it because it is trading above the VWAP but it is still below the pivot point. Then once the stock starts trading above the pivot point, now it is in the upper half of the range. You could add to that position and before you know it you have got a really nice trade going on. Start at $31.00, maybe 31.50 and by the end of the day you have made a couple bucks. That is not a bad return on a pretty clear trade.
Free Chart