Take a look at this chart below...
Ugly isn't it?
That, my VWAPian friends, is what we call a "choppy" stock.
This is the TQQQ, a direct leveraged representation of the NASDAQ 100 stocks.
And without any sort of guidance, it's hard to know exactly when to buy the stock and sell for a profit.
Now let's do something clever and add the VWAP to it...
It still looks choppy, but can start to see where one could have made money by buying and selling TQQQ in quick succession.
There are three spots in particular I want to focus on today.
So let's get right into it...
Profit Opportunity #1: The Opening Candle
As always with any trade I do, I set my guidelines ahead of time and draw my red lines.
TQQQ had gapped down overnight, so I was coming in with a bias to buy it.
The stock was chopping sideways at the open, which showed me that there was a battle going on between the shorts and the longs.
But that was good for my bias as it defined a range to where if the stock broke either way it would take off.
In our case it was the top and bottom of the first two candles.
That defined our risk. Buying it at VWAP we were risking 20 cents to make upwards of a dollar.
The stock then tested the low of the day again before ripping higher and breaking the previously set range as you can see in the white circle on the image below...
This was a quick trade as you would have wanted to sell into the move higher.
26.90 got you a 27 cent move up to 27.17. No one is ever perfect top ticking a trade, so that's why we sell into the move higher.
You want to always lock in at least a little bit of profit to make sure a winning trade doesn't turn into a loser.
Lets say you had 1000 shares of TQQQ and got in at 26.90. You would have wanted to sell some into the move upward.
I like to sell out of my position in 1/5 lots at a time. But I know more risk averse people that like to exit their positions in 1/3 lots.
It's up to you to decide how you want to do it.
Back to TQQQ. If I exited my position selling into a 20 cent move up, that's a quick $20 in my pocket that I didn't have before.
From here I would sell out the rest of my position if it broke back down under VWAP.
That way, I still have $20.00 in my pocket if it rolls back over on me.
I'm am hoping that the stock will jump a dollar up.
But I don't know it will do this.
So, the stock rolled back over on me and we still took a profit on the rest of our shares when it broke 27.00.
So that's $20 from our first sell. And that's $64 on the rest as it was an 8 cent profit on 800 shares. That's $88 that we didn't have to start the day.
But does that mean we stop for the day? Of course not!
That was one trade for a small win. We can keep on doing that over and over and make our money on the day.
That brings us to our next entry...
Profit Opportunity #2: The Fo Sho Bro Inception
Our next opportunity for buying into TQQQ came just 15 minutes later.
The stock dipped below the VWAP and immediately bounced back.
If we bought at the VWAP, that little dip would have been our risk.
But even if you didn't get in there, you had another chance.
TQQQ dipped back to the SAME LEVEL it did before.
It formed a small double bottom and reconfirmed the fight for the bulls to stay in power.
That second confirmation of support should have given you a chance to get in.
And buying it at the VWAP there led to some profits as you can see in the chart below...
And can you see what's forming there?
Otherwise known as a reason to stay in the trade, and watch it move all the way to the upside.
Buying at the VWAP, staying in the trade, and keeping your bearings would have gotten you from a VWAP break at 27.00 all the way up to 27.50.
1000 shares of that on a 50 cent move nets you $500 in your back pocket for the day.
I was screaming at my members of the Warlock's Room to go long on the Q's at this moment today.
And we were able to not only capture profits here but also in an earnings reversal on Morgan Stanley.
It's the best time to be trading the VWAP right now.
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