How I Knew When to Trade SHOP for +88%
A simple set up you can use with any stock. The bounce and the retest.
If you have taken a quality entry you know what a stress-free trade feels like.
And conversely, we have all taken mediocre to bad entries and suffered through the trade as we hoped it would turn green.
Well suffer no more!
Banking 88% gains with SHOP was no fluke.
There are set ups to look for as a trader. Set ups that will show you where the optimal entry is for your trade.
In fact, I found one for MARA that I’ll be posting for upgraded subscribers over this long weekend. Stay tuned for that!
The bounce off of prior resistance can be a powerful set up but an even better trade is to wait on the retest of this same level.
Of course, that is if you get it.
And depending on when you identify the potential entry point, you may need to be patient to wait for the retest to happen.
It can be tempting to get in on the initial move off of support and if you are nimble, you can get in and out for a quick trade.
I prefer taking a little more time, waiting for the retest, and if it comes through it also often comes with more upside.
Needing patience and sometimes not getting what you’re waiting for can be frustrating and difficult. And that should be no surprise.
But if you’re able to locate stocks that are forming this pattern, you might find the opportunity you are looking for.
Quality set ups require a bit of skill to identify, but I’m confident you can do it.
I’ll show you how it’s done.
Where is Resistance? When do I enter?
To trade a move off of prior resistance, you must first know how to identify prior resistance.
Pretty simple right? Well yeah, it kind of is.
There are two ways I go about finding these levels. This is one.
First, look for reversal points. These are spots on the chart where the candles have been on the move but then make a meaningful reverse that continues in the opposite direction.
If the initial direction is up, you usually want to place the resistance level at the top of the last positive candle. And if the initial direction is down, do the opposite and locate your level at the bottom of the last dropping candle.
Taking a look at SHOP, I’ve identified these potential resistance levels and circled the bounce and retests, which is where the optimal entries are.
You can see how tight the circles are, highlighting how quick the retest can happen.
If you notice that the levels you draw seems lightly off, make slight adjustments.
If you move to a nearby candle top or bottom, does it change the picture such that now you see multiple touch points on the level?
That is what you are looking for. If there are multiple touch points on a resistance line, either from below or above, it further confirms its level.
If your line appears to be a little off, make the adjustment to align to the right level.
Getting back to the chart for SHOP, the recent bounce off of 70.50 was a clean retest of this prior resistance level. It was the 5th retest entry in just over a year with a single bounce opportunity mixed in the middle.
That is six upside trades for nice profits off of this set up.
Six quality trade set ups in a single stock over the course of one year is not bad at all.
And if you don’t have time to watch the screen all day (neither do I), you can set an alert near the support level to get your attention when shares are about to retest.
I will no doubt be dropping more trading knowledge as well as a couple of trade ideas over the long weekend. You deserve nothing less!
Let me know if you have any questions and I hope you enjoy your day.
-Nate
This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.
Thank you! I also enjoyed your spaces talk and the use of the 3 point fib. Do you do this every Sunday?
Hey Nate! Would you mind weighing in on my thesis?
Looking at SHOP on the daily, it’s had 7 green bars in a row with the final 3 appearing to show bullish momentum slowing. I’m theorizing a pullback using fib retracements starting point is candle of 1/4, up to 1/12. The 0.5 level puts price at ~76.99. With a short trading week this might present an opportunity for profit taking. If I were to theorize my own trade idea I would look at an $80 put expiring 1/19.
Thank you for your time and consideration