Hi folks,
Last week the Art of Trading Private Community closed out two nicely profitable trades and now I want to take the time to show you the thought process behind these ideas!
$AR trade was good for a +13% gain
$SWN trade was good for a +16% gain
Here's how we did it!
$AR Trade Review – Long Side Trade
From 5/16/22 into 5/24/22 – Position Closed
We went long $AR on May 16th at $34.45. The stop loss was set at $32.80. I noted the recent Power Earnings Gap the stock made about 3 weeks prior. A second important characteristic to take note of is the 20 Day EMA. You’ll notice on the chart that this moving average is in a strong trend up and the stock has traded above this moving average since February of this year!
As the trade progressed, I made sure to note any other technical moves the stock made! On May 19th I noted a 2B Reversal that the stock made:
Here are the technical characteristics of a 2B reversal here:
A 2B reversal can be used in both bullish and bearish cases. I think that’s important to know in todays current market conditions!
As the $AR trade progressed it showed incredible relative strength in the market. Relative strength in weak markets is especially important. It basically shows that the market is still interested in the stocks and is confident enough in its potential short term and long-term performance that on the weakest days its still being bid higher. This bodes well for the strong days in the market because the market will most likely continue to bid the price higher and higher! Which in our case works out great!
This relative strength day turned out to be a higher low!
We booked the first half of our gain in $AR on May 23rd. It made a nice +10.5% move out of our entry.
The very next day, May 24th we booked the second half of the trade at $39.90. The stock hit the $40 target so I closed it out! Overall, this trade was good for an average of +13% from our original entry! Not bad!!!
$SWN Trade Review – Long Side Trade
From 5/20/22 into 5/26/22 – Position Closed
Much like $AR, $SWN was another energy type stock that showed relative strength through market weakness. What caught my eye about the setup initially was two factors. A strong bullish flag setup paired with a holy grail setup on the daily timeframe.
We took the stock long on May 20th at $7.08 with a $6.70 stop. The stop loss was placed slightly below the range of the previous two days. This area served as a higher low on the daily time frame.
The higher low built quickly and we were able to book the first half of the gain at +12% from our entry. When a stock moves quickly like this its best to realize some profits and let the rest run stress free. We did just that!
$SWN carried its strength into late last week and we were fortunate enough to catch a large part of that move. We sold the second half at $8.50 and in the end realized a gain of +16% on the trade! We were rewarded nicely for a short 4 day move!
Here is an updated AoT short term trading spreadsheet as of 2022-05-29 so you can see what we’ve accomplished so far this year!!!
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