Technical Trading Insights From A Professional Trader

18/07/2018

If you haven’t already, you must go and listen to Episode #60 – “An Expert Reviews Our Trades” to get the full context for this blog post. In a nutshell, Equity Mates were given some money from Stake, to participate in a two week trading competition with a bunch of financial journalists, to beta test their new trading app. Two weeks was a huge challenge for us here at Equity Mates, and there were a lot of lessons to be learned.

Stake set-up a WhatsApp group for all of the competitors in the competition, as an open forum for discussion, and to ask their CEO, Matt Leibowitz – who was the professional trader, and guru, amongst the group- any questions we had along the way.

The following is an extract of various conversations that we had throughout the two weeks. A lot of it is the advice that Matt was giving us, which was awesome. It will hopefully give you an insight into the way that a professional trader thinks, and some inspiration to begin trading yourself. We’ve added a bit of commentary to hopefully contextualise the responses.


Bryce’s opening question to Matt –

[20/6/18, 10:52:45 pm] Bryce: Nice! A quick question – when looking at charts – what’s the general time period to consider it for a ‘bottom left to top right’ approach ie 3 weeks, a month, 12 mths? (Bottom left, to top right, was the direction of the chart we were encouraged to look for, as seen in in image below) 

[20/6/18, 10:54:01 pm] Matt Leibowitz: @Bryce-  great question – that all depends on your own time frame. For these two weeks, its more about getting used to buying and selling and seeing how much opportunity and diversity there is in the US.   Also…if you want to win in 2 weeks, you may need to take more risk…:’0

[20/6/18, 10:54:17 pm] Matt Leibowitz: i normally suggest looking at the 1yr graph to start

[20/6/18, 10:54:52 pm] Matt Leibowitz: to get a general sense of how the stock is performing. sometimes I go out to 5 years if i want to see where its come from…

[20/6/18, 10:55:28 pm] Matt Leibowitz: anything beyond 5 years is like a different company and different set of people investing in the stock…so its not overly useful


Matt was the first to put a trade in for the competition –

[20/6/18, 10:52:58 pm] Matt Leibowitz: my first order is in…frontline…using my full arsenal (i.e close to $370)….my

stop is at $5.80…


We discuss our first stock pick –

[20/6/18, 10:56:47 pm] Matt Leibowitz: anything interesting you’re looking at?

[20/6/18, 10:58:10 pm] Bryce: We didn’t know where to start, so looked at recent IPOs for inspiration – AVLR potentially. But not a lot of history to base our decision on!

[20/6/18, 10:59:40 pm] Matt Leibowitz: AVLR…nice. That’s a great one. get in there – just have a plan!  IPOs have been going great recently, so you may be able to get a good run on it. Just be aware that if it turns the other way, you know what you’re going to do!


Resources for charts –

[21/6/18, 8:37:20 am] Bryce: Morning Matt – do you know of any good, free, screening tools for stock charts online?

Matt Leibowitz: @Bryce- Tradingview is very good for charts. Chartmill is also worth a look. Very easy to use. Either will suit your needs.


An update on the night of trading to come (markets in the US opened at 11:30pm Sydney time) –

[21/6/18, 9:26:28 pm] Matt Leibowitz: For tonight, not much has changed –  key is to keep to your plan with your stocks. I’m following the same as yesterday with a bit more attention on the Chinese stocks.  What the US has which is super exciting is access to some amazing Chinese companies, including Alibaba, Baozun (e-Commerce service provider), IQIYI (The Netflix of China) and Hailang (Education). These are billion dollar companies that go to the US to get global capital to grow – they have all expanded significantly.

Hailang and Baozun are ones I am watching closely. Not household names in Australia, but they have 1bn people to service + the rest of Asia (as Alibaba and Tencent have shown).  I own Baozun and its been great. Hailang (HLG) is up 900% in one year….see chart below.


It’s all about the sell side! One of the competitors had two stocks in mind, and wasn’t sure which one to buy –

[21/6/18, 10:10:00 pm] Matt Leibowitz: … The key to investing is the sell side, not the buy. So maybe take a small parcel of each and then manage your trade once you are in (i.e. have your sell orders ready if things go right or wrong).  Jump in and you’ll learn how to swim!


Taking advantage of the reporting season –

[25/6/18, 8:02:22 pm] Matt Leibowitz: Hi everyone, good evening!  Quick market summary – futures indicate that the market will open lower, but its not a guarantee that it will impact your stocks. This is particularly the case if your stock is reporting, which means its pretty much its own island for the next few days. ….sometimes with reports, there is some real great opportunities. Here is a great calendar to work through some reporting opportunities….https://seekingalpha.com/earnings/earnings-calendar

[25/6/18, 8:04:33 pm] Matt Leibowitz: What I like to do is look for stocks that have outperformed on their last few earnings – its means they under-promise ….& over deliver!  the best type of employees (and friends!)….A good example is Baozun (BZUN) or Etsy (ETSY)…you can see big jumps on their last few reports.

[25/6/18, 8:05:12 pm] Matt Leibowitz: if any of those stocks listed in the link have done that,  you may have an opportunity to cash in on an event for a quick one day trade!


Matt reveals the stock that was to be his winning trade move, UVXY –

[25/6/18, 10:55:57 pm] Matt Leibowitz: …In my non-competition portfolio, I am following UVXY….its an ETF that tracks volatility….confusing..but essentially shoots up when the markets get a bit hairy.  It’s not safe to invest in long term, but a great tool to trade if you want to jump in and out when you want to make (instead of lose) when the market is falling.


Not to be tried at home! The results worked well for Matt though…

[28/6/18, 12:57:29 pm] Matt Leibowitz: the reason for the UVXY trade was strategic – I thought the odds were in my favour with the market being so whippy plus I wanted to show you guys that:

a: money is made in any direction of the market (in Oz you can only buy and hope)

b: anyone of us can have the same chances as the institutional traders and access great products

c: there is risk in every trade you make – UVXY is highly volatile, but if you know your downside, it can still be a good trade (regardless if you win or lose).


Exploring the options of leveraged stocks, that is stocks that utilise debt to maximise returns (or losses) –

[27/6/18, 10:11:43 pm] Matt Leibowitz: alright, for those who want to win this through stealth, try the search feature on the app and type in “Leveraged”…its going to give you additional returns (or losses) on your trades.

These are specialised ETFs that are super popular as they replace margin accounts which can be called on and you can lose more than you invested.

[27/6/18, 10:19:36 pm] Matt Leibowitz: stocks mentioned in the mini-pod: (worth taking a look at)

SPXU – inverse SP 500

SQQQ – inverse Nasdaq 100

UVXY – A crazy volatility ETF….you can win or lose the whole game on this stock….its as volatile as my 5 year old’s current sleeping habits!

VXX – also volatile, but a little less so.


An insight into what Matt looks for in a chart –

[28/6/18, 6:32:36 am] Bryce: …Matt, im wondering what your most used ‘overlay screen’ is …ie RSI, 200 day moving avg, volume, etc that you put over charts ?

You can see that he looks for volume, and price (volume is the large red and green spikes at the bottom of the chart. The taller the spike, the more volume, or shares purchased, that day. Green means buying volume, and red is selling volume)

[28/6/18, 1:08:08 pm] Bryce: …. Do you generally wait for a number of spikes in volume before buying or is one enough for you to make a decision?

[28/6/18, 1:12:36 pm] Matt Leibowitz: price comes first. I’m happy to pay more (expensive is cheap!) so I know its a strong stock – but i’ll only pull the trigger once the volume is confirmed….so it can be 1 spike in volume, but it needs to be significant.  like 3-4x the average daily volume etc

[28/6/18, 1:31:22 pm] Bryce: Right at the start of the comp you said the shipping sector has a lot of volume coming back into it – is there a particular source/platform you use to get this info at industry/sector level? Or is it just a lot of reading etc?

[28/6/18, 1:33:34 pm] Matt Leibowitz: its actually from being in a stock. I bought SSW first then you just follow it and see related shares (on Stake ofcourse) and just see whats happening.   Before shipping – retail was super hot….the more you’re in the market, the more you absorb…its just osmosis.

plus its a bug…..i couldn’t imagine how my day would be without feeling the pulse of the market!


Mark Minervini –

[2/7/18, 10:30:31 pm] Matt Leibowitz: My favourite trader to follow – Mark Minervini

http://www.minervini.com/blog/index.php/blog/show/the_two_most_important_words_in_stock_speculation


Looking for the uncommon –

[2/7/18, 10:41:45 pm] Fred Schebesta: Now, where should we look that we aren’t looking.
[2/7/18, 10:42:59 pm] Matt Leibowitz: Commodity ETFs, short china and sector specific like pharma etc
[2/7/18, 10:43:32 pm] Matt Leibowitz: Stuff that isn’t going to be screwed by the market playing up
[2/7/18, 10:44:36 pm] Matt Leibowitz: I’m focusing very hard on very very strong stocks and playing the ETFs i know well. (The markets were quite volatile at this stage – picking something safe was important)
[2/7/18, 10:44:48 pm] Matt Leibowitz: Staying close to home with my strategy
[2/7/18, 10:45:31 pm] Matt Leibowitz: And having clear stops! (Stop losses)
[2/7/18, 10:45:34 pm] Fred Schebesta: Is there a stock Short on China?
[2/7/18, 10:45:40 pm] Matt Leibowitz: CHAD
[2/7/18, 10:45:49 pm] Matt Leibowitz: there is everything!!


Some stocks on Matt’s watchlist –

If you’re not sure what to trade / look at, here is a short list of what I’m looking at (nothing too well known except for ETSY…):

  •    Senseonics Holdings (SENS)  – 5 year highs, with lots of good news and volume. Left to right graph!
  •    Berkshire Hills Bancorp (BHLB) – Also making new ground on improved results.  I like stocks breaking into blue sky (there is no one who bought before who is trying to get out).
  •    Frontline (FRO) – Shipping sector has started to turn around and a lot more volume has come into the stock, most likely institutions, which is a sign of smart money.
  •    Vishay Intertechnology (VSH) – had a great run with lots of volume after it reported.  A nice left to right chart (see my tips) and think the potential is still there.
  •    ETSY (ETSY) – a recent 30% move after it reported, proving to be a quality business that has found its way. Cheap enough to still be acquired by Amazon, Alibaba or eBay etc.

This should be rule #1. Plan ahead. As soon as you buy a stock, write down your stop loss (it’s your level to get out if things don’t work out).  You can also have a level to get out if things go well.   


Does volume trend matter? –

Quick question: how important is volume trend – ie if price is consistently climbing but volume isn’t in a particular trend line, does that matter so much?
[20/6/18, 10:25:23 pm] Matt Leibowitz: You want to see volume go up on big up days
[20/6/18, 10:25:38 pm] Matt Leibowitz: Shows that there is commitment from. Instos
[20/6/18, 10:25:59 pm] Matt Leibowitz: Other than that volume can be fickle
[20/6/18, 10:26:07 pm] Matt Leibowitz: You just want the big days to have volume

See the large spikes in volume at the bottom of the graph that lead to large gaps in the share price? That’s what you want to be looking for –

Hopefully there was some useful stuff in there for you – if anything we hope it was an inspiration to have a go! We traded through the Stake app, which gave us access to the US market, but you could do that same through any platform that has access to the Australian market (although you’ll have to pay brokerage on each trade).

We learnt a lot over the two weeks, and this is certainly an area of investing that we are going to continue learning more about.

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