fbpx

Cryptocurrency is a particularly hot sector of the market right now.

Just in the past week, Bitcoin saw peak gains of 22% as it just crossed the $11K mark.

But naturally, this sector is filled with lots of sinister activity.

Crytocurreny gave rise to a dark market called the Silk Road, which was notorious for allowing people to transact drugs and other illegal things online.

The Silk Road has since been shut down and more positive potential of blockchain technology is becoming evident.

However, there’s still a lot of shady characters involved in crypto behind closed doors.

That’s why when it comes to profiting off this sector of the market, I resort to my Dark Pools scanner to size up potential opportunities.

Today, I want to reveal how— thanks to the scanner—  I snatched up an awesome win on two legs of Marathon (MARA), a patent company involved in bitcoin mining…

I’ll also explain why I’m looking for more upside on the remainder of the position.  

 

Suspicious Dark Pool Activity in MARA Screams “Buy”

 

Last week, I saw a suspicious dark pool print come across my scanner.

The company Marathon Patent Group (MARA).

Now, MARA is not a stock that I would ordinarily trade or that would otherwise catch my eye.

But the fact that bigtime traders showed substantial interest was enough to pique my own.

After noticing that 10 million plush shares changed hands with dark pool volume up 211%, I decided to take a position.  

I couldn’t be certain, but I wondered if someone knew something about impending news regarding MARA or the bitcoin price action as a whole.

Here are two things that I was seeing, right off the bat.

1. MARA had demonstrated activity over several days on the dark pool scanner and the price had increased, indicating buying.

2. The chart, technically speaking, looked very bullish. The stock looked like it could break out of it’s range to the high side.

My trade plan on MARA was to scale out with an initial target at $1.40 and then again at 1.88.

The chart was showing good support at. 85, so that is where I would have stopped out— though a conservative stop out would have been closer to .93.

But sure enough, my options on the first three-fourths of my trade went perfectly as planned.

I sold half at $1.40 for 35% profits and 1/4 at $1.88 for 75% profits.

 

 

It only became clear afterwards why MARA took off and why these big time players may have been interested in the stock…

MARA Could Play Favorably Into Earnings in 5 Trading Days

 

MARA turned out to be a classic example of the question…

 

“Did somebody know something?”

When the news came out just days after I spotted the dark pools activity, it left me wondering…

 

Source: Seeking Alpha

 

Of course, there could have been other factors that were part of it.

The major spike in bitcoin and other related assets is common after each bitcoin “halvening,” which is exactly what we’ve seen this past week.

Also, earnings are coming out for MARA on Aug 3rd, which is a week from Monday.

Volume in MARA was steadily increasing following the first dark pools activity I spotted.

This activity could be earnings-related as it’s only 5 trading days away.

Even though MARA has dipped slightly since I closed out three-fourths of the position, I’m continuing to hold the remainder to see if there’s more upside left ahead of earnings.

 

Find Out What Else I’m Seeing in the Dark Pools

 

This one trade on MARA is a great example of the potential power of following dark pools activity.

As I’ve said before, these kinds of situations happen all the time in the dark pools.

That’s why I’m teaching traders everyday how I’m investigating this “hidden” area of the market.

And here’s the best part…

I’ve actually been traveling the past week, which means that Dark Pools have allowed me to profit without having to spend hours of time glued to my screen.

I allow my scanner to tip me when some unusual activity is happening.

In fact, I just saw some unusual dark pools prints come through my scanner, and I’m including them in the next watchlist I’m sending out to members.

Find out how you can access my next watchlist here.

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

Sometimes offense doesn’t always mean you win the game

That’s why there’s a saying you might have heard before

Defenses win championships

While this might be true for Super Bowl Championships, it’s also a mindset shared by many traders.

If you ask most traders on Wall Street, they will echo a similar saying.  

While entries are important for all traders, it’s the way you manage risk (the defenses) that separates a good trader from a great trader.

And this starts with properly managing your trades and keeping your stops placed at the right level.  

 

What Is A Stop-Loss

 

As an active trader it is crucial to understand why and how stop losses are used to protect your trading account.

The stop loss order is one of the little things that are easy to forget about, especially when you’re in the heat of a trade.  

And then before you know it a trade is going against you and you take losses far larger than you wanted to.

What you’ll learn…

  1. All traders benefit from trading with either physical or mental stop orders
  2. Stop losses are designed to limit a traders loss on a position that goes against them
  3. Stop losses let you focus on other market events since you have an order that protects your account
  4. A disadvantage could come from placing an incorrect stop loss order, causing an unnecessary trade.

First, what exactly is a stop-loss?

stop-loss is simply an order that closes out your position at a specific price.  These orders typically control your risk by limiting your loss to the price set.

For example, if you buy a stock at $20 and place your stop-loss order at $18.00, your stop-loss order will be executed when the price reaches $18.00, preventing further losses in the event the market heads lower.  And if the price of the stock never drops down to $18.00, your stop-loss won’t get triggered, keeping you in your trade.

Pro Tip:  It’s important to make sure that you set all stop-loss orders to limit orders and not market orders.

Next…let’s take a look at where to place your stop-loss orders.

 

Where To Place A Stop-Loss Order

 

Similar to buying a stock, a stop-loss order on a long or short position should not be placed at random levels.  There is an art of giving the market that wiggle room to move around freely,  while still protecting your account from major losses.

With buying stock, a common stop-loss order falls just below the swing low price.  A swing low is created when a stock is rising and falling, and a swing low finds support at a price level in line with other swing points.

As a momentum trader, you want to make sure that you are trading in the direction of the trend.  This trend will be identified by higher lower swings being made.

Let’s take a look at an example of this trade.

 

Source: Tradingview

 

Assuming a trade was taken on the open of the day, you can see the stock ran higher.  Right after it made its first pullback and found a place to bounce, that area is called a “pivot”.

If you were trying to capture a larger move, ideal places to put your stop to allow a stock to run higher is right below each of the pivot lows.

It’s important to notice that when the market faded around 10:45 am to 11:45am, it never made it back down to the prior pivot low.  This meant that you gave your trade enough room to continue to trade higher.

But what if you wanted to keep the trade on a tighter leash?

Let’s take a look at how you could adjust your pivots to let you keep higher profits in the trade.  

 

Source: Tradingview

 

Pro Tip:  Having a tighter stop means you risk clipping your winners from running too early.  It’s a balance of just the right amount of risk management to keep profits and also let you capture enough profits.  

It’s all about the balance between risk and reward

Not into pivot levels?  Let’s take a look at alternative places for a stop-loss order to be placed.

 

Alternative Points For a Stop-Loss

 

Swing points not your style?

That’s ok!

The great thing about trading is that everyone has their own strategy and not any single one is better than the other.  Depending on your entry price and strategy, you might want to place your stop loss at an alternative spot on the chart.  There are plenty of other ways to handle stop losses on your trade that are more calculated compared with a pivot low.  

As a technical trader, there are many indicators that can be used as a stop-loss level.  If an indicator provides a buy signal, you can use that same indicator to provide an exit level.  If you wanted to combine indicators and have one for entry signals and one for exit signals, you can do that too!

Another great indicator to use for stop levels are Fibonacci Retracement levels.

 

Using Fibonacci Retracements As Stop Levels

 

When using Fibonacci as a stop-loss level, there is not a standard at which you have to follow.  This method is one of the more subjective stop-loss levels since it requires every trader to have their own unique viewpoint.

 

Source: Tradingview

 

As you can see the price moves lower , you would then determine the size of the pullback you are willing to accept and place your stop-loss exit that correlates to nearby fibonacci levels.  

In this example, to keep the most amount of profits we chose to use the 50% retracement for the stock.

Setting the exit at the next Fibonacci retracement is the most restrictive exit you can place, and should only be done if you are really confident that the support and resistance area will hold.

 

Using VWAP As a Stop-Loss

 

Using the Volume Weighted Average Price(VWAP) when trading in shorter term markets and day trading is a very effective strategy.  

First, why is VWAP important?

There are many reasons why VWAP matters for a trader to at least have reference to.  

Here are some benefits that make sense to me.

  • VWAP is a simple indicator
  • It builds in value, to give you a representation for where the average price is with volume
  • Stocks performance is built on periodicity instead of cumulative market data.

Here’s an example of the VWAP and how it gives you an area where the market broke down on.

 

Source: Tradingview

 

As you can see, this exit strategy gave you the most “wiggle room” for the trade to work as it ran rigger throughout the morning.

Conclusion

 

And that’s all it takes to successfully place a stop-loss order into the market

It’s important to remember that buying a stock, a stop-loss order on a long or short position should not be placed at random levels.  

There is an art of giving the market that wiggle room to move around freely,  while still protecting your account from major losses.

Click here to sign up for Daily Deposits

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

I’ve long been jealous of Jason Bond’s Model X Tesla.

I even got to spend some time hanging out with him in New Hampshire this past weekend, where he showed it off a little bit.

It looks gorgeous, it has some pretty darn cool features, and it’s definitely the way of the future.

A day will come when we all look back and talk about how we used to drive gas powered vehicles.

That day is coming sooner than you may think, evidenced by the number of new electric vehicles companies that are hitting the market.

 

 

Most recently, we saw Nikola (NKLA), the hydrogen-powered electric truck company, make waves.

Although it conducted its IPO in a round-about way via a SPAC merger, it was nevertheless hugely successful and minted founder Trevor Milton a multi-billionaire.  

This week, I’ve got my eyes on another electric vehicle IPO which comes on the heels of NKLA’s success.

It’s a Chinese company called Li Auto, which will list under the symbol ‘LI.’

I want to share some exciting things about the company and its trading potential.

 

Li’s Model X Alternative Is Functional— At a Much Lower Price

 

Much like what Tesla is doing with the Model X, Li Auto will provide consumers with a new electric SUV option.

Li kicked off production of its initial SUV model, a six-seater called Li One, in November 2019.

As of June 30 of this year, Li has produced more than 10,400 of these vehicles.

The SUVs that Li produces will cost between $21,000 and $70,000.

According to Li, they want to provide customers with “Unparalleled value for money with the performance, functionality, and cabin-space of a large premium SUV— but pricing close to a compact premium SUV.”

What I’m liking about Lik is the emphasis on value and functionality, since I feel they’ll be able to successfully undercut Tesla’s Model X that costs over $100,000 in both the U.S. and China.

Here’s a video about Li Auto:

 

 

Another Chinese electric car company, NIO, has been on a tear. The company is a similar size to Li and has shown 194% year to date gains.

An additional Chinese electric car rival, Xpeng, plans to go public later this year.

The potential market for electric vehicles is huge, and China is the world’s largest electric vehicle market and new car market.

 

Strong LI Underwriting Could Help Offset Concern Over U.S.- China Tensions  

 

No doubt, we’ve seen some recent geopolitical tension between the U.S. and China and some negative sentiment directed to Chinese companies following the Lukin Coffee fraud.

However, I’m optimistic that Li can offer a competitive and more affordable electric vehicle alternative within the U.S.

While LI is not yet profitable, its topline revenues are sharply growing. It also has reduced operating losses and a lowered use of cash in operations.

This is, of course, still based on a fairly limited production volume.

But one aspect of this IPO that is highly reassuring is the underwriting. Goldman Sachs, Morgan Stanley, and UBS are a few of the underwriters.

Goldman Sachs will lead the underwriting and IPOs facilitated by them over the recent 12-month period have pulled in a return of 74.8% on average since their IPO.

LI hopes to sell 95 million American depositary shares in a range between $8 and $10 in the IPO.

In turn, the company would raise about $760 million to $950 million dollars from public investors and reach a total valuation of $7.6 billion.

Whether or not I decide to trade LI, my premium IPO Payday subscribers will be the first to find out.

If you want to learn more about my IPO trading strategy, grab a copy of my IPO Jackpots ebook here.

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

Related Articles: