We were given another eventful week in the market! The week started off with a very strong push higher out of the recent low the market made (January 24th through the 28th). Markets pushed with strength from Monday into Wednesday with $QQQ making a near +5% move upward inside 3 trading days. $FB earnings reversed this strong action. By the close on Friday $QQQ closed up 1.76% for the week.
$QQQ is down -10%~ YTD! The Art of Trading short term portfolio (which we have been reviewing at the end of each week) Is now +14%~ YTD! We will take a look at 3 of our short-term trades we made this week. $SQ, $MRO and $SOXS
The "SHORT TERM TRADES" portfolio is basically this:
The trade alerts will be labeled "SHORT TERM TRADES". These will be trades that last a few days in duration, and we will be booking profits and losses much more actively. Holding no more than 4 active positions at a time. We will look to capitalize on long positions and potential short positions when the occasions are right.
$SQ Trade Review – From 1/31/22 into 2/02/22 – Position Closed (Long Side Trade)
$MRO Trade Review – From 2/01/22 into 2/04/22 – Position Closed (Long Side Trade)
$SOXS Trade Review – From 2/03/22 into 2/04/22 – Position Closed (Long Side Trade)
Ok, let’s get started with the trade reviews! This review guide should cover the reasoning and the technicals behind each one of these trades. If you have any questions or feedback about the guide or a specific trade or section, write them down as you go a long, e-mail them to me and I’ll make sure to answer any question(s) that you may have!
$SQ Trade Review – Long Side Trade
From 1/31/22 into 2/02/22 – Position Closed
We went long $SQ on January 31st. We closed the position over a 2-day period for a 1.89% gain.
The biggest standout on this particular position was the 65% recent pullback from November 2021 into January 2022. RSI was severely oversold this day and risk vs reward favored a trade for a minimum a bounce out of the oversold condition. We used the low of the day (January 31st) as a gauge for our risk and placed our stop loss slightly below this level.
The very next day $SQ pop 10% from our entry. Given that this is our short-term trading portfolio focused on netting gains we took this opportunity to take half of the trade off.
It made sense to take off half of the gap up open off in $SQ given that this market has been relentless at selling any opening strength over the past month. We talked about this in the private feed that day and it gave Art of Trading private members a nice chance to discuss why we took this trade off when we did. I tweeted about it early that day!
The gap up open actually bounced right into the 20EMA, which has acted as strict downside trend resistance since the stock started to fall in November of 2021. We used this spot to book half of the gain and it just so happened to be paired with how the stock gapped up that morning. Straight into resistance!
$PYPL reported earnings the night of February 1st 2022. Again, a poor report that rocked the stock lower. Since $SQ is in this same online payment / point of sale market naturally the stock followed $PYPL down. We sold the remaining half of our position the very next morning.
Booking half of our profits into the 10% gap up open a day prior still allowed us to exit this trade with a net gain of 1.89%. The market once again proved that booking nice short-term profits in this environment is necessary.
$MRO Trade Review – Long Side Trade
From 2/01/22 into 2/04/22 – Position Closed
We went long $MRO on February 1st. We closed $MRO on February 4th for a 4.47% gain.
$MRO caught my eye because of the recent strength in the energy market. $MRO has been trending nicely above the 20 EMA for an extended period of time and created a Holy Grail Setup! You can read more about the technical characteristics of a Holy Grail Setup here .
$MRO Showed decent relative strength throughout the week. Even on Thursday when NASDAQ closed down nearly 4%~, $MRO still held up.
Given how fast $MRO has pulled back into the 20D EMA during its recent trend, again we used the gap up open day we saw on $MRO to take profits. We booked near 5%~ gains on this short-term trade! Not bad at all in my books!
$SOXS Trade Review – Long Side Trade
From 2/03/22 into 2/04/22 – Position Closed
$SOXS is an inversed leveraged ETF. This particular trading tool follows the semi conductor space in an inverse manner! Basically, if the semi-conductor market goes DOWN 1% in a day this ETF will go UP 3%. So, although we went “Long”, $SOXS will do what a short position would do but on the long side!
$SOXS caught my eye for a second time this year because during its recent pullback $SMH retested and failed at the head and shoulder topping pattern. So, we played $SMH downside via $SOXS.
The very next morning the market gapped down and $SOXS gapped up. Shortly after the gap down open the market attempted to go green. Quickly reversing back red. $SOXS attempted to take out and stay above the intraday high but couldn’t hold the gain. I quickly reacted to closed the position for a 6%~ gain!
Once again, the market proved the importance of taking gains quickly. By the end of the day $SOXS closed at $4.50. If we had of been more patient with the position most of our gains would have been left behind at the closing price for the day!
That’s it for this week’s trade review!
Cheers and Happy Trading!
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