[VIDEO] How To Trade Major Gap Down Washout Days, They Don’t Come Often!

These are some of the most fun days in the market. There have only been a handful of them in the last six months and they really give some amazing opportunities to ANYONE who prepares for it. The last few gap down days were when SPY was at the lows. We saw red candle after red candle and finally the panic set in it gapped down a few hundred points and the wash out came in. Typically this happens within the first one or two minutes for optimal entry.

The way I typically trade these days is by picking stocks I wouldn’t mind “getting stuck in” if I am early, wrong etc. I always give myself more fire power to add on gap downs like this and typically stay out of the trade until market open. The goal for me is to take advantage of the market orders on open and any more washout as a result of it.

Today we were super prepared and the only thing I did wrong was I didn’t buy enough 🙂

My whole thought today was that this whole oil Doha meeting stuff was NEVER expected to have a freeze. That was the excuse people gave as to “why oil ran” and when there was no idea, media ate that up. “NO DEAL!!” so bad!! etc … But it wasn’t EXPECTED. So to that, it smelled like opportunity. Gap it down !! In fact I thought it may go green as I wrote – and it nearly did !

Remember that time Oil gapped down and closed green? lol

— Nathan Michaud (@InvestorsLive) April 18, 2016

Here’s a recap from today and how I trade washouts.

Enjoy the video!

I’ve included the morning chat logs today so you can see the plan prior to market open to see why/how I prepared the way I did which are posted at the bottom.

Below are some entries and charts of the trades we did today:

Whenever trading energy names I always watch USO XLE and XOP

Here are the morning washout snags WLL bottom ended up being $9.60 I just took the offer – this is one of those times it’s quick reaction that matters – PAY THE ECN fee don’t be cheap !

CLF was probably the best trade idea of the day given that NUGT involves more risk than most should be taking and CPXX well that was picture perfect but the help of some heavily followed bio guys had some negative view points that took it down so although it was perfect, it definitely was unnatural but I won’t complain!

CLF I had overnight from last week. I’d been buying dips for a few days, sold most before the close, and added in this morning. I scaled up throughout the day, sold a bunch $4.45-4.46 into close and holding rest over. We’ll see how it goes.

CHK perfect fade right into the open volume candle and straight up. If you weren’t fortunate enough to snag the wash out – where was the next ABCD set up and risk that you see? Leave a comment in the comment section!

SDRL I’ve been trading washouts the past few days and been holding over. I had $3.50 entry from last week had a bunch added added and sold more than 3/4s of it Friday into close given the Doha news expected Sunday. So I did start “down” compared to Friday on this but given the entry no big deal and this opportunity was an absolute gift.

CPXX as explained on the video – wrong at first but did the right thing. Nothing wrong with trading in the first few minutes off emotion but it’s a scalp and if it doesn’t do as expected or starts to collect and head higher GET OUT and hope for higher – that’s exactly what we did!

I waited for it to blow off into the $17s $17.30-.40 and the volume bar then got short and added to winner – you can see my scale and short here:

As you can see I downsized a BIT too early but I never get angry about it as I may have been “too patient” and covered at the same spot anyway.

NUGT ended up being my main gainer with an entry then the scale which you can see below:

What is important to note here is the scale – entry to start then add, add, and slammed in when it was about to wash (or at least I thought it was going to). I was extremely happy with my covers on NUGT. I’m best out of the gate on NUGT but I absolutely have the most difficulty with it after 10:30AM and during lull when I try to anticipate direction. The best way to trade this ETF for ME is either 1) Join trend 2) out of the gate 3) into the last 30-40 minutes

AVOID OTHERWISE if you see me trading it any other time, please PM me and slap me !!