$JNUG: Nailing it Long and Short 

Gold recently had a major, multi-year breakout over the $1370 resistance level.  Gold miner ETF’s like JNUG have started to find high relative volume and range, making them amazing vehicles for day trading. JNUG is a 3x leveraged gold miner’s ETF, and it is one of my favorite instruments to day trade when Gold starts to trend and find momentum. 

It is a leveraged ETF, so it is great for day trading, but not what you want to swing trade or invest in long-term. Yesterday I hit JNUG long and then flipped short during the market open: 

Let’s take a look at its intraday chart and I’ll breakdown my thought process and trading plan:

JNUG yesterday was gapping down from its prior close. This is the ideal scenario for a R/G (red to green) setup. JNUG had a strong day on Thursday and went up about 20%. It had demonstrated that there were momentum and trend in the name. At the open once it tested its VWAP (Volume Weighted Price Average) and held I got long at $83.50, with tight risk under LOD (low of day). I scaled out into strength (took most of it off too soon in hindsight!) in the $84-$86 range. 

Recognizing the Fizzle Potential

 But after such a big move the day before, it needs to have a pullback to offer a high probability long trade. The gap down was the pullback that was needed, and what gave me conviction for the long bias at the open. But you can also see by its daily that it had two big up days prior. It would be hard to expect a long to follow through much beyond yesterday’s HOD (high of day).   

Once it started to reject yesterday’s HOD and fail to hold over the level,  it was signaling to me that it was about to pullback. Once it cracked VWAP and could barely find a bounce, I knew that the backside was in. I got short when it pulled back to retest VWAP and scaled out into the next flushes. 

$CRWD Trade Recap

CRWD was gapping up big in response to a strong earnings report. It was at all-time highs, so my bias was to the long side, especially since it was a recent IPO with a strong uptrend. Here is a look at its intraday chart:

My thought process was that the selloff at the open would get bought up eventually. Sell-offs at the open are actually a good thing sometimes when you are looking to long something, as it offers you better risk vs reward entries, and an opportunity to get in at lower prices.

I got long at $82.74 once it started to settle a bit and work out the sellers. My plan was to scale out into strength. I took out 1/3 at $84.70, and my plan was to hold the rest for a pushover HOD. We were never able to get enough momentum to break HOD, so I took off the rest of my shares once it broke back under VWAP. This will be on the top of my watch list next week for more momentum to the long side.

Summary: Biggest Take-Aways

1. Have a Nimble Bias: Price Action is King
2. Mark Out Key Levels on the Daily BEFORE Taking the Trade (Knowing where JNUG’s HOD is, and understanding the potential for it to act as resistance)
3. Have a Trading Plan and STICK to It: Entry, Stop, $ Risk, First Target, Exit Strategy

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The post BOWS Day Trading Recap 7/19: $JNUG and $CRWD Analysis appeared first on Bulls on Wall Street.

For those that don’t know me, I am one of Kunal’s students, and I help moderate the BOWS day trading chatroom. Primarily a day trader that focuses on trading momentum stocks, mainly to the long side.

The key for day trading small stocks correctly is to use a proven, back-tested system, and have sound risk management. Today I’ll walk you through my thought process behind my $GHSI trade this morning, and how I approached it:

$GHSI Daily Chart 

$GHSI is a recent IPO with a downtrending daily. I always approach small caps stocks a trading vehicle, not something for a long term investment.  Right is a market environment where we are seeing a lot of junk small-cap companies are taking off and following through to the longside. $CAPR, $IMRN, $MDGS just to name a few from the last couple weeks. 

This company was gapping up on news that it was awarded a patent from the Hong Kong Patents Registry. It actually wasn’t even on my watch list until it popped up on my scanner after its initial push through $2 at 9:40 am.

Trade Executions

Hindsight comments about what a stock did and why is pointless. The only thing that matters is if/where you bought, and where you sold. $GHSI had room to run on its daily to the mid $2’s, there was strong relative volume, a catalyst, and a low volume pullback to its intraday moving averages before the move had really gotten extreme.

I got long at $1.76 once it started to hold the pullback to the 9 EMA, with risk under the 20 EMA (the green moving average) at $1.64. My plan was to take half of my position off on pop through $2, and take off the rest near the daily resistance in the $2.20’s. I was able to only risk about $.12, and made about .49. 1:4 risk vs reward.

Did not sell the exact top of the move, but no one really ever knows how high these things will go. The best way to play these is to scale out into strength. Often these small caps will have bigs drops after such a big move upwards.  My first target was a pop through $2, as whole numbers can often act as resistance with stocks. The stock than had a volatility halt for 5 minutes (see here for a description of what these are), and then a sold the rest on pop into the $2.30’s, near the daily resistance levels.

Day Trading Tips and Lessons from The Trade

1. Use Moving Averages to Control Risk

Moving averages are great indicators for basing your risk on for day trades. It also shows you when a stock is getting extended and needs to pull back and consolidate before continuing trend. Once stocks pull into their MA’s, you can get low-risk entries with great risk vs reward. When playing moving average pullbacks, make sure to wait for some confirmation that the stock is HOLDING the moving average. Many traders make the mistake of buying the stock as soon as it gets close to the moving average, and it dumps right through it.

2. Scale-out into Strength

Small-cap stocks are volatile, and they don’t go straight up or down. A great way to take some profits, but still leave yourself in a position to capitalize on a bigger move is a trick called scaling. I talked about it above, but what scaling is selling a portion of your position when you have a profit. In my trade, I sold 3/5 of my position on the pop through $2, and then sold the other 2/5 in the $2.

3. Don’t Marry the Stock

99.9999% of penny stocks are a piece of shit company. Investing in penny stocks is basically just giving away your money to short-sellers. But there are plenty of short-term trading opportunities to capitalize on. Many novice traders make the mistake of holding onto a penny stock with the hope it turns out to be the next Amazon. It won’t be. By the dip, sell the rip, and move on.

4. Have a Trading Plan

Small-cap stocks with this much volume and trend move FAST. You have to pre-plan your trade before you take it. I guarantee that if you trade this without a plan you will either panic out on the first dip, or you will freeze and not cut the loss where you are supposed to.

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