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Gap down bounce day - Wedge and trend PB - LULU - 9-1-23.pptx

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MaartenvanBemmel3

Strong bounce play on LULU. They announced that they were lowering their guidance for the next quarter. This is bad news, but recent prior earnings LULU already gapped and trended down 13%. Today LULU gapped down almost 11%, and the market deemed that it was extended. Today price

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D1 catalyst - Gap down Bounce Day Catalyst: Guidance down before earnings. Setup: Gap down Bounce/Reversal day Trades: Opening range consolidation & Trend PB Ticker: LULU Date: 9-1-23
Gameplan What is the catalyst? LULU lowers guidance on margin disappointment. 26% premarket volume buzz which is huge. Gapping down 10% which is almost -4ATR. What is the setup & intraday fundamentals? D1 catalyst / changing fundamentals. ATR: 8.78 What does the daily look like? Any recent/prior gap ups/downs. Has it a lot of big trend days? ATR moves? Look for repetitive price action and similar setups! Last earnings we had a 3 ATR gap down followed by a 2 ATR down trend day. Earnings before that we had a gap up of +2ATR and down trend day of 1.75ATR Big gaps have occurred plenty of times in 2022. 3ATR is still a lot, but it can trend further down, like on last earnings. Overall, LULU isn’t in a strong down trend. It’s more consolidating trending up. Lulu also has shown that it’s capable of a lot of gap down reversal/bounce trend days without a consolidation. Those were big +2ATR trend days after gaps. Given the potential setup and catalyst, are we likely to trend or range? Above and below what key levels does a trade2hold/trend become more likely? Consider ATR moves. Above 308-310 we could trend to the upside. We could trend towards the 280 which is premarket low and a HTF level. But we could also have a range day here. I am less certain it will be a trend day. And below this level we have already moved 2 ATR and we are more extended. If we reclaim 308, we have better RR than we trade down 281. But we could still trend towards 280. We can be very weak intraday. When we reclaim 308, we have already move >1.25ATR. This is an infliction level where above we can trend. That level is when we hold significantly above the open. A trend starts after the open so this should be the main focus point. We could trend up, but a close near HOD would have been unlikely.
Key levels Identify areas of interest. These are prices a stock will tend to trade to, after they had a catalyst. If a stock can move through these levels, they may have an explosive move. Is there an inflection level? Support 281: premarket low and HTF level. 8.5-9/10 level. Resistance: 308 area. This is a HTF level but not specifically pinned down to 308, 310 would be more obvious. Where are we likely to open? How close are we to the next important levels in terms of ATR? Around 296 or so. 310 area is about 1.5ATR away. 280 premarket low is about 2ATR away.
Catalyst & Fundamentals Catalyst: lowers guidance. Setup: D1 Catalyst, Gap down reversal Premarket pre buzz: Float: 112 million Institutional Ownership: 89% Short %: 3,4% ATR: 8,78. Average Daily volume (50 day): 2,3 million. Daily volume: 8,3 million. Gap%/Gap ATR: -10,8% / >4ATR RVOL: >3
Bounce Trend day– Trade Strategy Stock selection -Stock in play with a significant (technical) catalyst, earnings report or strong/weak theme. -Elevated RVOL above 2-3. -News catalyst Bounce Trend Day cue’s/variables Extreme weakness: - 11% gap down = -4ATR -Plenty of consecutive red days/selling; recently had on which we gapped down 3 ATR, and trended down 2.5ATR -Elevated selling volume on daily. -Preceding day(s) where a potential bottom/range is in. Massive selling seems over for at least 1 day. -Reclaim of important key levels. Trade2hold factors on Bounce Trend day: - Holding above significant support levels intraday: opening range levels were held. -Strong market, holding the lows in an uptrend OR the market has a Bounce Trend day as well. -Very weak daily chart. No extreme selling, but in a down trend. - Elevated RVOL. -Strong open through resistance (8/10), or price is holding above opening range -Strong open in extended (+1 ATR) = Room to trend intraday.
Trend PB - Trade2hold – Trade Management Trade2hold - Flat Significant 5m close above 20 EMA: 1) close on above average buying volume; 2) a new 5m high that occurs after close; Goal: don’t sell more than 50% when going flat. Reason2hold -Shallow volume and making lower highs. Sometimes the trend is still intact when there’s a significant close above the 5m 20EMA. Trade2hold – Exit strategy -ATR moves: 1,5ATR or 1,75ATR. Given prior the big ATR moves on prior gaps, I would want to hold the core to 1,75ATR. Trend PB Entry: After price pulled in 5m 9 or 20 EMA and after a top has formed on tape: -We can’t trade lower. -Tape starts to get stronger. -Bids are stepping up. -Stronger offers get taken out. Risk: At the bottom of the pullback.
Big gap price history Gap Gap ATR ATR move C - H in ATR -7,0% -2,28 2,24 -0,10 7,5% 2,11 2,48 -0,99 10,0% 3,10 1,83 -1,53 4,6% 1,32 1,19 -0,06 -7,8 -2,88 2,53 -2,21 Gap (reversal) trend days and one earnings day where we reversed a strong opening drive and still closed green. All had big gaps, elevated volume and strong ATR moves! 4/5 did a move >1.75ATR. The only day that didn’t wasn’t significant in volume and gapped up <5%
Technical Analysis: Trend PB 10m holds above 9EMA, 5m holds above 20 EMA. Shallow volume during PB Pullback visible on multiple time frames: 1m, 5m, 10m. Bounce of key level: 298; Opening range high Elevated volume when PB starts to work.
Technical Analysis: Opening Range consolidation breakout Open range: 1 ATR. Low volume into consolidation Holds opening range low Elevated volume when opening range breaks Perfect wedge pattern.
Ideal Entry -298,19 is 33% of the range from the low of the retracement the prior HOD. This would have been a difficult entry due to the wick, but not impossible. -It’s important that I prepare this level in advance. - The 2nd higher low provided a nice opportunity to add and get bigger. The consolidation volume here was very low.
What could I have done better? ? I could have prepared this setup a lot better. I took a bounce setup into consideration into my gameplan. I even considered a bounce trend day. But what is the extreme weakness why this stock is oversold? What are the %-moves on the daily chart? If I prepare for a potential bounce day, I am saying that this stock possibly is down too much. I need to be more specific in my gameplan and go through the playbook criteria/variables of this setup.

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Gap down bounce day - Wedge and trend PB - LULU - 9-1-23.pptx

  • 1. D1 catalyst - Gap down Bounce Day Catalyst: Guidance down before earnings. Setup: Gap down Bounce/Reversal day Trades: Opening range consolidation & Trend PB Ticker: LULU Date: 9-1-23
  • 2. Gameplan What is the catalyst? LULU lowers guidance on margin disappointment. 26% premarket volume buzz which is huge. Gapping down 10% which is almost -4ATR. What is the setup & intraday fundamentals? D1 catalyst / changing fundamentals. ATR: 8.78 What does the daily look like? Any recent/prior gap ups/downs. Has it a lot of big trend days? ATR moves? Look for repetitive price action and similar setups! Last earnings we had a 3 ATR gap down followed by a 2 ATR down trend day. Earnings before that we had a gap up of +2ATR and down trend day of 1.75ATR Big gaps have occurred plenty of times in 2022. 3ATR is still a lot, but it can trend further down, like on last earnings. Overall, LULU isn’t in a strong down trend. It’s more consolidating trending up. Lulu also has shown that it’s capable of a lot of gap down reversal/bounce trend days without a consolidation. Those were big +2ATR trend days after gaps. Given the potential setup and catalyst, are we likely to trend or range? Above and below what key levels does a trade2hold/trend become more likely? Consider ATR moves. Above 308-310 we could trend to the upside. We could trend towards the 280 which is premarket low and a HTF level. But we could also have a range day here. I am less certain it will be a trend day. And below this level we have already moved 2 ATR and we are more extended. If we reclaim 308, we have better RR than we trade down 281. But we could still trend towards 280. We can be very weak intraday. When we reclaim 308, we have already move >1.25ATR. This is an infliction level where above we can trend. That level is when we hold significantly above the open. A trend starts after the open so this should be the main focus point. We could trend up, but a close near HOD would have been unlikely.
  • 3. Key levels Identify areas of interest. These are prices a stock will tend to trade to, after they had a catalyst. If a stock can move through these levels, they may have an explosive move. Is there an inflection level? Support 281: premarket low and HTF level. 8.5-9/10 level. Resistance: 308 area. This is a HTF level but not specifically pinned down to 308, 310 would be more obvious. Where are we likely to open? How close are we to the next important levels in terms of ATR? Around 296 or so. 310 area is about 1.5ATR away. 280 premarket low is about 2ATR away.
  • 4. Catalyst & Fundamentals Catalyst: lowers guidance. Setup: D1 Catalyst, Gap down reversal Premarket pre buzz: Float: 112 million Institutional Ownership: 89% Short %: 3,4% ATR: 8,78. Average Daily volume (50 day): 2,3 million. Daily volume: 8,3 million. Gap%/Gap ATR: -10,8% / >4ATR RVOL: >3
  • 5. Bounce Trend day– Trade Strategy Stock selection -Stock in play with a significant (technical) catalyst, earnings report or strong/weak theme. -Elevated RVOL above 2-3. -News catalyst Bounce Trend Day cue’s/variables Extreme weakness: - 11% gap down = -4ATR -Plenty of consecutive red days/selling; recently had on which we gapped down 3 ATR, and trended down 2.5ATR -Elevated selling volume on daily. -Preceding day(s) where a potential bottom/range is in. Massive selling seems over for at least 1 day. -Reclaim of important key levels. Trade2hold factors on Bounce Trend day: - Holding above significant support levels intraday: opening range levels were held. -Strong market, holding the lows in an uptrend OR the market has a Bounce Trend day as well. -Very weak daily chart. No extreme selling, but in a down trend. - Elevated RVOL. -Strong open through resistance (8/10), or price is holding above opening range -Strong open in extended (+1 ATR) = Room to trend intraday.
  • 6. Trend PB - Trade2hold – Trade Management Trade2hold - Flat Significant 5m close above 20 EMA: 1) close on above average buying volume; 2) a new 5m high that occurs after close; Goal: don’t sell more than 50% when going flat. Reason2hold -Shallow volume and making lower highs. Sometimes the trend is still intact when there’s a significant close above the 5m 20EMA. Trade2hold – Exit strategy -ATR moves: 1,5ATR or 1,75ATR. Given prior the big ATR moves on prior gaps, I would want to hold the core to 1,75ATR. Trend PB Entry: After price pulled in 5m 9 or 20 EMA and after a top has formed on tape: -We can’t trade lower. -Tape starts to get stronger. -Bids are stepping up. -Stronger offers get taken out. Risk: At the bottom of the pullback.
  • 7. Big gap price history Gap Gap ATR ATR move C - H in ATR -7,0% -2,28 2,24 -0,10 7,5% 2,11 2,48 -0,99 10,0% 3,10 1,83 -1,53 4,6% 1,32 1,19 -0,06 -7,8 -2,88 2,53 -2,21 Gap (reversal) trend days and one earnings day where we reversed a strong opening drive and still closed green. All had big gaps, elevated volume and strong ATR moves! 4/5 did a move >1.75ATR. The only day that didn’t wasn’t significant in volume and gapped up <5%
  • 8. Technical Analysis: Trend PB 10m holds above 9EMA, 5m holds above 20 EMA. Shallow volume during PB Pullback visible on multiple time frames: 1m, 5m, 10m. Bounce of key level: 298; Opening range high Elevated volume when PB starts to work.
  • 9. Technical Analysis: Opening Range consolidation breakout Open range: 1 ATR. Low volume into consolidation Holds opening range low Elevated volume when opening range breaks Perfect wedge pattern.
  • 10. Ideal Entry -298,19 is 33% of the range from the low of the retracement the prior HOD. This would have been a difficult entry due to the wick, but not impossible. -It’s important that I prepare this level in advance. - The 2nd higher low provided a nice opportunity to add and get bigger. The consolidation volume here was very low.
  • 11. What could I have done better? ? I could have prepared this setup a lot better. I took a bounce setup into consideration into my gameplan. I even considered a bounce trend day. But what is the extreme weakness why this stock is oversold? What are the %-moves on the daily chart? If I prepare for a potential bounce day, I am saying that this stock possibly is down too much. I need to be more specific in my gameplan and go through the playbook criteria/variables of this setup.