When VWAP Tells You to Switch Teams
Hey there, VWAP tribe!
Once again, if you didn’t catch me trading LIVE at 9:30 a.m. ET this morning, you missed out on some real-time $$$$, not to mention another EPIC DANCE PARTY to celebrate.
Click here to dance it out with me!
However, if you ARE watching me LIVE each day, you’ve probably noticed that sometimes we have boring trades that take hours to play out…
But most of the time, day trading around the 1-minute VWAP means we need to be quick, agile, flexible, and ready to turn on a dime.
By that I mean – what was a bearish position to start the day could turn into a bullish play FAST… IF the VWAP validates the reversal.
And trust me – you never want to be short stocks breaking back above the VWAP, especially if the company just reported earnings, like we saw with Overstock (OSTK) today.
Switching Sides on OSTK
Ahead of the bell, I was scanning the market for earnings movers – my favorite kind of trade – when none other than Overstock caught my eye.
The shares were trading below the 1-minute VWAP in pre-market trading (the shaded area of the chart below), and my short-selling ears perked up when I saw the “Kiss-Back” and rejection at this line shortly after 8 a.m.
The Finger of God slapped OSTK shares early
And short sellers probably got REAL excited when OSTK broke its pre-market lows shortly after that (no pun intended). I know I did.
Further, the break of $71.00 opened the door to a drop to the round-number $70 level, which subsequently opened the door to a drop to $67.50…
Remember – whole and half numbers often act as magnets for stocks, especially when options expiration is close, because many strikes are priced in $2.50 increments.
So, it was no surprise to watch OSTK find support at $67.50 – “support” being the key word here.
Because as you can see, not long after the open, OSTK made a big, fat candle flex on the 1-minute chart, breaking back above the VWAP.
And what do I always say, BLANCHE?
Never stay short stocks that reported earnings and are breaking back above the VWAP!
Stocks that gap down on earnings usually find buyers, like OSTK
OSTK shares then went on to retest the $76 area, so eagle-eyed traders who bought shares around the VWAP break near $74 could’ve grabbed a healthy gain in a matter of minutes.
The point is – to be a successful day trader, you have to commit to watching your charts and being nimble in your positions.
But fear not – having relevant, staggered stops/targets in place at the onset, and then adjusting those stops and taking some profits as the stock moves in your favor, keeps you from being a bag-holder or not paying yourself, if you run out of Depends and have to (gasp!) walk away to use the restroom or somethin’.
Make sure you’re watching the Announcements while I’m LIVE
Every day is Groundhog’s Day when you’re trading VWAP, so I’m sure we’ll have a lot more opportunities tomorrow morning!
Because while the numbers and letters might change, the VWAP is immortal.
See you then!
Kenny “The Warlock” Glick
3 responses to “When VWAP Tells You to Switch Teams”
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July 29 2021
Well said Kenny! You are the oracle. I just joined the Money Morning Live few days ago, and I look forward to seeing you and listening to you before the market opens and at 9:30 when you are on. I stayed a little too long on my six in the money long call option contracts on OSTK today (OSTK Jul 30 2021 73 Call (Weekly)). I saw $1,200+ gain, but by the time I got out, it evaporated to only about $300. It’s a learning curve. Won’t let that happen again.
Keep up the good work.
Thank$ for the BTU trade, I listened on that one. I was too busy chasing other rabbits to pick up on the OSTK trade. I have to narrow my focus more. Great job Kenny
First trade on one of your recommendations, BTU. Made just under $300!! Thanks. Looking forward to tomorrow.