Video summary
In this episode of The Stock Swoosh Show, host Melissa Arma reviews her "Play of the Day" featuring a short trade on DKS, using the transaction to illustrate the nuances of aggressive day trading versus holding positions longer. Although she exited the position relatively quickly in the morning, the stock continued to decline significantly after her exit, dropping another $16 by the close and reaching a low of 124 just two minutes before the market closed. Melissa uses this example to highlight that while she prefers fast exits for day trades to avoid unexpected news or economic reports during the day, holding an original position through the close could have yielded substantially higher profits in this specific instance. She acknowledges that perfect exits are not always possible and emphasizes that her strategy involves getting out quickly to secure gains early, leaving the rest of the trading day free from market volatility.
The core of Melissa's approach relies on a rigorous 26-point rating system she developed to evaluate earnings gaps, which represent the difference between a stock's previous close and its opening price. She explains that while one cannot simply short every downward gap or go long on every upward gap, her method helps determine the most probable direction for a stock after such an event. In the case of DKS, the stock opened at 142.36 after closing the previous day at 179.33, creating a significant gap that she rated highly based on her analysis. Her conviction in this setup led her to enter the trade aggressively, and although she typically holds options for longer durations like weekly expirations, she chose to manage this specific short position with standard day-trading money management principles, exiting once her initial profit targets were met.
Melissa concludes by discussing the importance of money management and personal trading style, noting that her experience over nearly two decades suggests that fast morning exits are often superior for avoiding daily uncertainties. She mentions that she plans to discuss this specific trade in depth with her students during an upcoming room session, as the stock's continued decline after her exit serves as a powerful lesson on market behavior. For those interested in learning more about her gap trading strategies, she promotes her "Golden Gap" class scheduled for September 26th and 27th, inviting viewers to email her with questions. The episode wraps up by noting that this successful short trade occurred right before the Labor Day holiday, marking a transition into the end of summer as she continues to refine her picks for the upcoming market season.
Read the full video transcript
Hello there everyone. Welcome. This is
Melissa Arma with the Stock Swiss and
I'm reviewing the Stock Swiss show play
of the day today which was DKS. Do you
want to hear something really really
funny about this? [laughter]
Where I got out of this was, you know, a
quick fast exit. I like to do day trades
and get out really fast and quick in the
morning. But if I had held my original
position
literally all day into the close into
355 or whatever, um I would [laughter]
have made so much more money. So people
always say, "Oh, do you always have the
perfect perfect exits?" No, I do not. I
I do not. So, um you know, for my day
trading, I get out fast. I feel more at
ease holding options trades because I'm
doing the weekly options expirations.
But I am going to talk about this in the
room tomorrow because it is almost
insane actually where I got out of this
and then where it went. [laughter]
But let's go over the trade. Um
actually looks like 2 minutes before the
close the low of the day came down to
124. That's crazy. This went more than
$16 further since my exit. I'm telling
you. Oh, let me look at it here.
And that's the story sometimes. That's
what happens. Anyways, we were very,
very aggressive. I usually am. Got in,
got the drop. I did hold it longer than
most people. I got out somewhere in
here. One of these bars in here. I got
out. Um, again, I usually do day trades
on a minute in five minutes. Less than
10 minutes. Like could be three minutes.
I could have held this and what I could
have done is put the stop at break even
and let it ride. It never went anywhere
near my stop. Never actually backed up
anywhere near where I entered it. Um,
but I did have a good move in it
actually because I'm very aggressive in
my entries because I have 100%
conviction when I see something after I
rate the gap that it's going to work.
And again, I was talking about the fact
that this could keep going. So well I
don't I don't think anyone in the room
held it but um this is definitely
discussion for tomorrow in the room
because of where this went today again
124. So this was an earnings gap. Now
what is a gap? A gap is a difference
between the close and the open. I like
to short. I prefer to short. This was a
short. I'm an expert in shorting
actually. So this closed actually uh
yesterday at 17933. Open in the morning
at 14236. You cannot short every gap
down. You cannot short every gap up. You
cannot go long every gap up. You cannot
go long every gap down. So I developed a
method which is a 26 point rating system
to determine what direction the stock's
going to go when I see the gap. So I saw
this gap. I rated it. It rated well. So
that's why I decided to do it. And again
my management, my money management as I
usually exit day trades fast and I'm
tend to hold options longer because you
have more time in an option couple of
days or a week. So anyways, it I I saw
this then around lunchtime. I'm like,
what? And and then it just kept going
and going and going. But I will say it's
nice to see something, you know, was a
good call. It was a great call to see
this would do what it did. And you know,
maybe somebody held it. You know, maybe
somebody in the room held it. Uh your
money management is your decision. I go
over targets in the class. I teach exits
in the class. But I found over the
years, and this is just my experience
trading for almost 20 years, that it's
better to get out fast in the morning.
then you don't have to worry about
breaking news or economic reports or any
of the other crap that goes out there
news-wise during the day. So, it's nice
to be able to make money fast and have
the rest of the day to yourself. That's
something I'm very good at doing. So,
anyone interested in the Golden Gap
class for September, the class is the
26th and 27th. If you have questions,
you can email me at Melissa the
stockwish.com.
Great short in DTS. It was a stock swish
show play of the day today. again
getting into the end of summer here into
the holiday time with Labor Day. You
know, really narrowing it down to find
the best best pick, which I normally do.
We'll see what we get tomorrow. Have a
great day.