Title: Second Day Trend-Trend Trade
Strategy Description: This occurs when fundamental news aligns itself with the long-term trend and the short term trend. Being a second day play it is likely to have slightly cleaner price action than the first day, and you can determine the likelihood of continuation from the first day.
For example in this case, YELP closed at the lows on the first day, and therefore it has a statistically significant probability of closing at the lows the second day.
Accordingly look for suitable RR places to get in the direction of the trend.
Big Picture: The market won't have too much of an effect on this trade, provided it isn't up or down by too much. It will still help a little bit though.
Intraday Fundamentals: ATR=$2.83, FS=16%, ADV=2.6m, Rvol=5x, Market Cap=$3b.
Technical Analysis: Have to go back a long time to find any support levels, so no real support for quite a while. Resistance at $45.
Clear intraday levels on the chart, and vwap generally respected.
Reading the Tape: I didn't trade the stock like this, so I don't quite know what the tape would have been going. But I feel like the second failure at vwap would have been very clear on the tape.
Trade Management: Initiate the trade into the failed test of r/g. At this stage could probably chase a little, with a wide stop because of the possibility of a significant opening drive giving solid risk-reward. Given that it is the open want to cover all of the position into the opening drive as it extends around 1 ATR, then re-establish it on the failure to hold vwap. Look to manage some into the weakness, and into new lows, getting down to about 1/3 (which is to be held literally as long as possible into the close), then re-establish on the second failure of vwap.
Again, look to manage this into news lows getting down to 1/3, and then get back in some on a hold below the morning lows (tight stop on this bit), add back to full size at the confluence at 3pm, and then cover into the close.
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