Hi Folks,
Last week (03-07-2024) Art of Trading members made a 2 day trade from 03-07-2024 into 03-08-2024 that returned a very quick 19.34%! The stock we traded was $CLSK and I want to walk you through the trade management, rationale, and execution of this trade here today!
I shared this same trade on my Traderstewie public X feed so if you took that trade idea from there this review will help with that too!
Recently $CLSK put in a very strong Power Earnings Gap (PEG) that followed through to the upside and nearly doubled in 12 short trading days. Volume has been outstanding with obvious signs of accumulation volume along the way (marked on the chart with black arrows). Making this stock one that I closely watch and a tradeable candidate on any sort of meaningful pullback!
Last week I shared this tweet here:
Short interest found on Finviz was another point of interest for this trade, sitting close to 13% making it a potential short squeeze trade.
Now that I've gathered the technical characteristics that make up the technical setup:
I need to come up with a trading plan suitable for the way in which this individual stock trades. Visually just by looking at the $CLSK chart you can see that it trades a very wide and potentially volatile range each day.
Quickly referencing the daily range of this stock its going to "feel" and trade much different then a stock like $AAPL or $NFLX or an ETF like $QQQ.
I think in general that it is important that traders size all of their trades the same. For example the model Art of Trading swing trading portfolio is $100k in size with a $25k (25%) swing trade position size. BUT there are always reasonable exceptions to rules in trading especially when it comes to responsible position sizing.
A "full sized" trade would fall into the category of an $AAPL a $NFLX or a $QQQ. An exception to that rule would be a stock like $CLSK or a $SMCI or a $MSTR.
In this $CLSK example we sized the trade at 1/2 size. So instead of our standard 25% sized positioning we used a 12.5% position. This allows us to set a suitable stop within the average trading range of the stock and it allows us to weather volatility as the stock works itself out.
You can visualize the daily average range of a stock using an indicator known as "Average True Range" or ATR indicator. It's generally displayed in terms of a dollar value of the Average True Daily Range derived off of a 14 day SMA. This can also be visualized as a percentage through Average True Range Percent. Read more about that here: ATR .
Ok, so how did the Art of Trading trade $CLSK?
Art of Trading members went long $CLSK on March 7th at $16.75 (Stop at $14.70)
HALF SIZE POSTION
The stop loss was placed at $14.70 which was 8 cents lower than the March 5th candle. Doing this allowed the stock to trade within a reasonable range and for our position to not get prematurely stopped out. You can now understand the importance of proper positioning (half sized position) because of this. The potential loss on a full size position would be too wide.
The very next day the stock rallied into $20 which was my intraday target for Friday. I decided to book the gain at $19.99.
This trade produced a 19.34% gain in two short trading days! With our $12.5k sizing this was equal to $2418! A substantial gain for a 1/2 sized position!
As important as it is to size volatile stocks properly its also just as important to book gains and not get overly greedy in trades like these. They can reverse down just as fast as they reversed on the way up. The market conditions on Friday played a role in realizing the gains and not allowing the trade to get away from us.
Thanks for reading this step by step educational post! Try to apply some of the concepts from this trade into your very own!
