New market commentary & trade ideas/updates continue to be light as there hasn’t been any significant developments to report in the broad market (other than a flurry of additional bearish topping candlesticks over the last few days).  I have come across several new trade ideas this week which I plan to cull through in order to add those with most attractive R/R (risk to reward) potential & highest probability of playing out (as over the last few months, there has been an usual disconnect between the two as some very high probability bearish patterns were trumped by an uncharacteristically strong market).

When the R/R for trading is as unattractive as it has been lately, I capitalize on that opportunity to spend some time away from my desk, focusing on more productive issues, which helps prevent trader burnout.  While I was out for most of the day, I just noticed that ZNGA finally made a sustained breakout and close above the 4.05 level today.  ZNGA was posted as a Long Setup on Friday with an entry to be triggered on either any intraday break above 4.05 or on a 15, 60 minute or even daily close above 4.05 in order to help minimize the chance of entering prematurely on a false breakout (which is exactly what happened shortly after the post on Friday).  The ZNGA trade was discussed in yesterday’s Social Media Stocks Overview video in which I also reiterated that ZNGA was the only social media stock that I was near-term bullish on while I was quite bearish on the entire sector.

Although I was (am) bearish on the Social Media sector, I took a long position in ZNGA following the intraday break above 4.05 on Friday.  Being bearish on the sector but only looking for a quick trade on ZNGA, my preferred target was T1 (4.43) with my preferred stop on a move below 3.95.  As such, I was taken out on Monday (with no regrets as a plan is a plan) and the stock continued to drift lower on low volume until bottoming at 3.84 later that day…. a mere 6 cents above the suggested stop (for those targeting T2) of a move below 3.79 (i.e.- $3.78).  From there, the stock reversed and moved higher, with a very quick (almost instantaneous) pop to just above the 4.05 immediately following the opening bell (never chase a breakout in the first few minutes of trading.).  Zynga then pulled back slightly before powering back above the 4.05 level and making a solid run (on volume) all the way up to 4.23.  From there, the stock pulled back on low volume to make a perfect (to the cent) backtest of the 4.05 break-point before blasting higher on very high volume into the close as illustrated in the 1-minute chart below.

Although I am not crazy about this trade(and have already been stopped out for a loss with no intention of re-entering, I wanted to share this trade as an example of how various time frames can be used to help micro-manage a trade.  Those with the luxury of being able to spend time in front of the computer could have watched the action on ZNGA today and placed a buy order at either the 12:04pm (ET) break above 4.05 (remember, don’t chase breakouts on the open) or at the pullback to 4.05 which occurred at 3:10 & 3:11 pm ET, both with the appropriate stops somewhat below that level, depending on your preferred target.  I should also add that with some of the more recent developments in both the broad market as well as the social media stocks, if I were to still be long ZNGA with an original plan to hold out for T2 (5.20), I would either revise my trading plan to target T1 while raising my stop to just below 4.00 at this point or place a relatively tight trailing stop.

Finally, the other take away from today’s “confirmed” breakout in ZNGA is the fact that technical analysis can be used to find the most bullish (or bearish) looking stocks in a sector, regardless of the technical posture of the entire sector.  As the social media stocks watchlist superimposed on the daily chart above shows (all the same stocks covered in yesterday’s video), other than a nearly flat close in FB today, the social media stocks were down sharply while ZNGA bucked the trend with a 7% gain on the day.