Shared by
BanalityOfEvil
PLAY
DRCT – premarket scalp with opening drive
CATALYST
Last night after hours positive sales guidance was released, price has gapped up over night
8:46:02AM
DRCT
DIRECT DIGITAL HOLDINGS SHARES ARE TRADING HIGHER AFTER THE COMPANY REPORTED A YEAR OVER YEAR INCREASE IN Q4 SALES RESULTS AND ISSUED Q1 SALES GUIDANCE ABOVE ANALYST ESTIMATES.
TRADE IDEA
DRCT could touch $5 in premarket or on the open, and potentially trend higher, possibly becoming a momentum play
SETUP QUALITY
A- (a lot of topping wicks on the daily but near ATH in premarket), could at least offer a scalping opportunity
BIG PICTURE
• Recent IPO in February
• Float 2.5M
• Fresh news catalyst
• ATR .57
• SPY holding over 450 this week
• VIX is under 20 (not good for momentum, but is still hanging around 18)
• Overall market has been bullish
PLAN
• Enter in premarket with small size if price moves back to $4 area (also the VWAP) and shows steady volume or increasing volume at this level.
• Take some profit around 450, and re-add a momentum lot depending on the price action
• Hold small runner for any potential momentum over $5. A full ATR on this is .50 so there is no issue with taking full profit at $5
• A strong move over $5 on the open, holding and moving higher will confirm large MOMO potential for the opening drive.
• If price breaks $5 and holds with large volume and low algo presence, consider adding a momentum lot during opening price discovery.
• Use discretion to unload the momo lot
• Max stop is $4 in premarket and $4.50 on the open
EXECUTIONS AND PRICE ACTION
@8:35 starting building position with tight stop below $4
@8:50 took some profit at 1st target and re-added momentum lot, blue sky add (small)
@9:02 took profit on momentum lot (only want to hold feeler into the open)
@9:00-9:30 price is consolidating cleanly over 4.50, no add unless $5 is broken and holds with confirmation on volume and tape. CURRENT AVG IS $4.38, HFT presence is LIGHT (like to see this)
@OPEN price moves through $5 but not as quickly as a 2.5M share float stock should, some HFT printing on the tape, taming the volatility. Price briefly wicks below 5, and I unload ½ at HOD $5.20
@9:35 price seems to be consolidating well over $5 with lighter volume (like to see this) add Momentum lot
@9:37 some buyers step up but the tape is extremely heavy, floundering at HOD, tape slowing, I unload ½. $5 breaks on large red volume bar, huge topping wick on the 1min, sell full position at new price AVG $5. ALL OUT
KEY TAKEAWAYS
• Good job recognizing that this was a support play, and not a breakout trade (even though the stock was breaking out). The daily indicated to me that adding at break points could result in a large loss as could be seen by huge topping wicks on the daily chart.
• Good job taking a scalp approach on this and utilizing your hotkeys well to get filled on profit. Without DAS I doubt I would have been able to get out of this trade with any decent profits.
• Good job recognizing this was not an A+ setup (sketchy daily chart) all other factors were A+ aside from VIX being a little low
premarket prep
Symbol
SPY
VIX
Execution detail:
| Date/time | Symbol | Side | Price | Position |
|---|---|---|---|---|
| 2022-03-30 08:35:21 | DRCT | buy | $4.190 | long |
| 2022-03-30 08:44:49 | DRCT | buy | $4.080 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 08:59:34 | DRCT | sell | $4.440 | long |
| 2022-03-30 09:01:29 | DRCT | buy | $4.630 | long |
| 2022-03-30 09:02:17 | DRCT | sell | $4.770 | long |
| 2022-03-30 09:31:58 | DRCT | sell | $5.250 | long |
| 2022-03-30 09:34:09 | DRCT | buy | $5.200 | long |
| 2022-03-30 09:37:12 | DRCT | sell | $5.340 | long |
| 2022-03-30 09:37:59 | DRCT | sell | $4.980 | 0 |
Comments
BanalityOfEvil
thanks Riley.
We were so close to the open on this one so hypothetically, depending on how 4.50 was rejected in that scenario, I most likely would have reduced size down to a feeler on the rejection in order to see how it would react on the open (assuming that it continued to hole $4 in premarket). But if that situation had occurred I would have been extremely skeptical about any continuation in the name and would either have only traded very small on the open, looking for $4 to hold and only trying to scalp back up to 4.25-4.50, which I think is a poor R/R trade anyways.
There is a good chance I would have just cut 100% if it didn't break 4.50
This was a blue sky setup above $4.50, premarket trading is cleaner than intraday trading since the algos can't dig their claws in too deep (IMO), and if the move didn't happen here with conviction, then it would have told me the name was actually weak.
thanks for helping me look deeper at this trade
either traded small on the open or cut 100%*** (end of 1st paragraph)
rileysheehan
Thanks for the response.
It seems like pre mkt is a huge edge for you, I might want to test this strategy in the future. seems like you can manage emotion better and evaluate momentum all while getting an early entry too, so just not having to deal with what comes with these small caps going haywire on the open. This is great. Also your welcome, glad to help with that.
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Great trade here.
Would you have held small pos size at re add @ 8:50 if it didn't break through res right away or had rejection or would you have just exited and looked for re entry after consolidation?