Hey there, VWAP heads!
Today I’m going to give you a day-trading lesson that you’ll REALLY want to note and put in your everyday trading habits.
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 when we traded the stock CPOP: It’s better to be late and right than early and wrong.
On the day, CPOP was on my daily pre-market Watchlist on the day, so I was keeping an eye on it.
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.
In fact, CPOP made a quick dart to the upside, rallying more than 20% in about 20 minutes!
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.
The fact the stock tagged the 1-minute VWAP to the PENNY just underscores that this market is programmed around VWAP, boys and girls.
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.
See you soon!
Kenny “The Warlock” Glick