I just wanted to give everyone a step-by-step review of a trade that Art of Trading members recently completed and I would like to break it down in detail, step-by-step for you!
So, what made $RBLX appealing for a long side swing trade? How did I spot the setup and what did I see in it?
On October 21st I noticed that $RBLX was starting to form a nice flagging pattern which was starting to compress and coil tightly during the prior 4 trading days. $RBLX initially jumped higher on October 17th after reporting an increase in Daily Active Users year over year and hours of engagement rising 16% in the same time period (Article). This would have been the initial bullish catalyst to set this technical trade up! Catalysts can set trades up much like a Power Earnings Gap would!
We went long @ $42.55 with a stop just below the coiling pattern @ $39.90 on October 21st!
Another bullish characteristic to take note of is how after forming a larger wedging type pattern from August into mid October the positive report on user metrics allowed the stock to break out of that pattern and trade back above the 20d EMA and form the smaller pattern in which we traded!
$RBLX broke out to the upside of the mini flag pattern that we entered! Here was the tweet highlighting that here:
"The Best Trades Work Right Away!"
$RBLX continued to show strength on multiple time frames. Shortly after sharing the breakout tweet I shared another tweet of the strong intra-day action of $RBLX that morning. As a trader it is important to observe the price action of a trade on multiple time frames. Early signs of a breakout or price exhaustion can be observed on smaller timeframes.
The above chart shows how the stock gapped on volume and strength, then you'll notice the stock pulled back slightly on low volume and then continued higher again after the low volume pullback! This is TEXTBOOK bullish price action!
The very next morning (October 26th) $RBLX received a rare double upgrade on the same day from two separate analysts. I Tweeted this information to Art of Trading private members first thing!
$GOOGL and $MSFT helped gap down NASDAQ at open but $RBLX continued to show relative strength! The stock quickly went from Red 2 Green (R2G)!
We used this early morning strength to book half of the trade @ $47.00 for nearly +11%!!!
The next morning I made an observation on $NYMO and $NAMO charts and noticed the market trading back into Overbought territory again. $NYMO and $NAMO have been very strong indicators for this 2022 bear market in terms of where the market might begin to roll over again!
I tweeted this:
I used this as a signal to book the second part of the $RBLX trade! The secondary catalyst was $AMZN and $AAPL earnings after the close. I didn't want to give up a nice gain in a volatile market!
I hope you found this step-by-step guide useful! I cross referenced a few of my previous posts inside of this one here so you can always go back and refresh on previous topics to take your trading to the next level!
How has AoT performed in 2022? +30% YTD!!! Review our trades below!
Cheers and happy trading!
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