Hey there, VWAP heads!
I hope everyone enjoyed the extra 30 minutes of LIVE TRADING instruction with me this morning.
If you missed it, though, have no fear – The Warlock is here to guide you.
Along with reviewing the importance of the ProShares Ultra VIX Short Term Futures ETF (UVXY) going higher again (which, remember, should trend lower by default), we also eyeballed a few notable earnings reactions.
To start, we watched blue chip IBM (IBM), which offered an important lesson on the VWAP Kiss-Back and when sellers are still in control…
Fellow earnings stock Steel Dynamics (STLD) also put on a VWAP clinic with one of my favorite earnings patterns…
And shares of Pop Culture Group (CPOP) – whatever THAT company is – demonstrated perhaps one of the most important Knowledge Bombs of all…
Knowledge Bomb of the Day
Of course, EVERYTHING I say is important, as you know, but when I drop Knowledge Bombs, you’d better pay attention!
And today’s KBotD is brought to you by CPOP: It’s better to be late and right than early and wrong.
Now, I initially LOST money playing CPOP – and for many traders, that alone might mean an automatic DQ on ever trading the shares again.
But not if you’re a VWAP day trader!
CPOP started the day consolidating below its 1-minute VWAP (blue line on the chart below), but started pushing up against this trendline around 10:20 a.m. ET.
The stock’s next candle was a MONSTER, taking CPOP not only above the 1-minute, but above the multiday VWAP (orange/yellow dashed line) as well!
Not to mention the shares took out a relevant whole number at $7.00 in the same fell swoop, and as I’ve told dedicated VWAPians several times before, breaks of whole and half numbers can often clear the path even higher.
All of these feats amounted to a massively bullish signal for the stock.
Does this mean that I, Kenny Glick, am the Abraham of Assets?
Yes. Yes, it does.
It also confirms that the ALGOS are in control, as a lot of automated trading is based on Volume-Weighted Average Price.
Now, I didn’t exit my position at the very top of that CPOP move, mostly because I never exit my entire position at one price!
I took some profits along the way, and while that meant I might miss out on more upside, it also presented another learning opportunity for my disciples:
I’d rather be upset that a stock went a lot higher after I got out than be stuck holding the bag on some Pump & Dump “psycho stock” that could fall to $0.
Plus, as alluded to earlier, perhaps the most important teachable moment today came not on that 10:20 a.m. 1-minute VWAP break… but on the subsequent Popeye Moment.
You can see that after CPOP flirted with $8.40, it became overextended, reverting back to the 1-minute VWAP – which is like Popeye’s can of spinach for stocks.
Just as the Sailor Man needs to chug spinach to recharge, stocks need to recharge at their 1-minute VWAP, due to simple mean reversion.
Once CPOP got its greens and kissed the 1-minute VWAP, it was off to the races yet again – proving that IF YOU MISSED THE FIRST MOVE, JUST WAIT A WHILE.
However, once again – be careful with these no-name stocks, because those that get Pumped usually get Dumped… and unlike with an established company like IBM, you might not get your money back with some of the sketchier names.
But during this time of year, the trade you really WANNA watch for is the good old-fashioned earnings reversal.
STLD’s pop was one I initially missed, but I’ll continue to watch for opportunities on this one, like the classic Checkmark of the Lord pattern we witnessed this morning.
On my radar tomorrow could be names like Netflix (NFLX), Chipotle (CMG), Coca-Cola (KO), Johnson & Johnson (JNJ), Verizon (VZ), and more!
But to find out, you gotta tune into Money Morning LIVE at 8:30 a.m. ET tomorrow, followed by my LIVE trading hour.
See you there!
Kenny “The Warlock” Glick
July 20 2021