Here’s how I’m trading Wheaton Precious Metals ($WPM). (February 06, 2020)


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I want to look at Wheaton Precious Metals ( NYSE: WPM ); in fact we will do this first and then I will show you some of the things we did this morning.

We will start out with Gold ( NYSEARCA: GLD ) here. Gold ( NYSEARCA: GLD ) has been kind of strong. Silver ( NYSEARCA: SLV ) is kind of hanging in there. One of my ex-favorites stocks is Kirkland Lake ( NYSE: KL ), that’s not doing well. Franco-Nevada ( NYSE: FNV ) is, it is still just kind of keeps on coming.

Now we are back to Wheaton Precious Metals ( NYSE: WPM ), silver. The reason is because I see this kind of setting up to be a pretty good low-risk long. I am not really sure whether I would say it is high probability simply because, I see this little breakout here but that quickly faded, so we have this resistance here right at $30.00 but we have a higher low here. If we want to kind of extend it back further we’ve got 3 higher lows, depending on how you want to count.

So this is how you are going to make the trade: The first thing you want to do is you have got to decide where you want to put your stop; where is your risk? What I do is, I will look here, in this case, where does the stock have to fall in order for me to say, “Oh crap, I’m wrong on this?” You don’t want it to have to fall that far. I am not talking about setting a tight stop I am talking about setting a reasonable stop. In other words, what is your reason for putting the stop where it is?

You can put a tight stop on any trade that you make and you are virtually guaranteed to get knocked out most of the time. Because a lot of traders, what they do is, they place stops that are too tight increasing the odds that they are going to get stopped out. But I will go back a step further and say their issue isn’t their stop, it’s the entry, it is the location of your entry.

What you want to be doing is, I am digressing but that’s what I do, Let’s say you are entering here, you have seen the stock, it traded down here and then 2 days in a row it ran up. And then finally the third day it also ran up and that’s where you bought it because by golly, you just knew this stock was going to break out above this level and keep on going and you might be late but, by gosh, you are not going to miss the train.

So then the stock runs up a little bit, you are still holding it. And then it starts to fall, and fall and in order for you to know when you are wrong you really have to look at what has happened before and this is really your support level that I have just drawn. So you are buying up here close to 30.00, your real support level is down here below 28.00, that’s a pretty big risk.

On the other hand, if you didn’t chase the stock there and instead had a different entry, like let’s say here, you can make these kind of entries this isn’t just backwards logic. If you have a process you can do this and now you are putting a stop, you could say, “Well all right, it’s back above the 50 so I will keep a pretty tight one there.” Probably the more viable one would be to keep it here. Then the only reason you are going to bet stopped out is if the stock falls back and undercuts this and prints a new low; it’s a pretty choppy stock though.

Well here we got a pretty good indication that there are buyers coming in. The volume is heavier than it has been over the last couple of days when the stock was just kind of drifting down to the 50. And now if you look at where the stock has closed here, you drag this down underneath this low from Tuesday morning when the stock traded down there, you can keep a tight stop of 2.5 percent. That is not very much money to risk.

What you are doing is, if the stock trades around here for a while, however long, that’s really okay. Your trade isn’t making money but it is not losing you money and you may certainly be correct in buying the stock, maybe it is just a little early. But if the stock falls back down below this level then you want to be out of the stock because you don’t know how far it is going to go. This is a stock that I think is buyable here, you’ve got about 2.5 percent risk. You look to see how the stock trades up at 30.00 and then if it breaks through that’s when you add some more.

Let’s look at a couple of stocks that we covered today in the opening rotation, which is what I call the first hour of trading. World Wrestling Entertainment ( NYSE: WWE ). Somebody’s head got slammed into the turnbuckle here. A couple of weeks ago or it was last week the stock gapped down it didn’t really move much. We actually traded this too so it just kind of happened that we were able to trade it again the next time around. But some board members left and that knocked the stock down.

And then this morning the company reported some pretty brutal earnings and the stock came down again. It gapped down a lot it gapped down 17 percent. We were looking to go long this stock, which is exactly what we did. It turned out to be a really good trade, virtually right out of the gate. The stock comes up, never comes down to a new low. And then finally, when it comes back up here, and we were in after 2 or 3 minutes I think, but we got it very, very close to the low of the day and then just rode this thing all the way up and our traders made some really good money on this.

Another one was Funko ( NASDAQ: FNKO ). The company said basically, “Our business sucks these days.” And so this was another stock that traded really low and traders held this for several percentage doing really, really well.

And then the last one was a different kind of trade, Twitter ( NYSE: TWTR ). If we go up to the daily chart you can see the stock gapped up here right up to the 200-day moving average, where you would say, “Well, that’ s going to be resistance. You will probably see some selling there.” That’s what you may expect but it didn’t happen. The stock gapped up there and then it kept going. So as soon as it does that you know that there are going to be buyers that are come into this stock and are going to take this thing higher. So we had a bunch of traders making good money on that too.

The bottom line is, these opening rotation moves work really, really well if you know what you are looking for.

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