Anatomy Of A Trade: ARM +35% Reversal Extension

Oliver Kell
Oliver Kell

Oliver Kell is a champion trader who achieved an impressive 941% return by winning the 2020 U.S. Investing Championship. With years of active trading experience, Oliver has developed strategies that thrive in both uptrends and downtrends.

September 11, 2024
5 min read
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After ARM broke out into new highs above its IPO date, it advanced an incredible 175% in three months.

Oliver continuously watched this first mature base begin to develop after he saw a Reversal Extension in April. After the price reclaimed the moving averages, a clear EMA Crossback provided an ideal entry.

This trade review will unveil Oliver’s thought process and execution throughout a quick 35% trade.

ARM 35 Reversal

The Tell

Date: May 28, 2024

The previous two weeks consolidated tightly between $110 and $117 after a Wedge Pop reclaimed the moving averages. Breaking over $117 was a tell on the weekly and daily time frames, and we busted through it.

Oliver was viewing ARM as a risk on/off name when viewing risk appetite for newer stocks, the semiconductor group, and the underlying market.

Taking out $126.87 on the weekly knockout bar high would be a strong sign for the overall market.

ARM 35 Reversal

Multiple Time Frames

Date: May 31, 2024

Weekly: ARM has been standing out in the short term. The KEY level to put it back in play is taking out the Weekly Knockout bar high at $126.87.

ARM 35 Reversal

Daily: We are now backtesting the $117 level and now either push up off the EMAs or move on.

On an intraday chart, Olliver noted that $124 can be an early cheat level to get us in before the 126.87 level. During a weekend routine, he noted that R1 will be at 124.31 on 6/3.

ARM 35 Reversal

Trade Initiated

Date: June 3, 2024

Today’s daily action closed above the weekly knockout bar high. A huge deal for now that will need to reconfirm by the weekly close.

Oliver entered with a partial position here as it was weak relative to NVDA and MU, but considered adding a little more if the price could take out today’s high area.

ARM 35 Reversal

Strong Follow Through

Date: June 5, 2024

After an inside day supported by the 5EMA, ARM saw a strong follow-through with increased volume.

Oliver raised his stops to the $126.75 area that coincided roughly with the Weekly Knockout trigger, but ideally wanted to see $130 hold.

The strong price action closed above the next swing point at $135.41 but a stiffer resistance level at $145/$150 looms above. At this point, Oliver is watching the price action and riding the trend noting a couple of consolidation days may be necessary.

ARM 35 Reversal

Possible Bearish Signal

Date: June 7, 2024

This can be viewed as a shooting star bearish candle formation and will likely need some chop as the price is now short-term extended.

Analyzing the price action bar by bar allows you to adapt your trading plan accordingly. Reading the chart and creating expectations makes the decision process easier when the next candle forms.

ARM 35 Reversal

Waiting Patiently

Date: June 10, 2024

At this point, ARM is resting nicely and Oliver lets the trade play out.

Once the trade is placed and the price action is progressing higher, Ideally the 10ema catches up to the price.

ARM 35 Reversal

Reduced Into Strength

Date: June 12, 2024

After the price seemed to be getting ahead of itself, Oliver took off 1/5th of the position.

Selling into strength guarantees profits and allows the trade to play out as it rides the moving averages.

ARM 35 Reversal

Sold More

Date: June 14, 2024

After ARM took out the all-time highs, it then pulled back and closed near the lows.

Oliver viewed this as the 1st Extension away from the MAs and reduced to about a 1/2-sized position.

ARM 35 Reversal

At this time Oliver also drew up some plans and considered adding a second position if the price chopped properly, but wanted to see more.

As the price rides the moving averages, the stops continue to increase to a new area under the previous lows.

Positive Price Action

Date: June 17, 2024

The price chopped after Friday’s extension which is a positive sign but is still extended. Stops are kept very tight under the extension day’s low.

ARM 35 Reversal

Reconfirmation Higher

Date: June 19, 2024

An ignite bar reconfirms higher. Stops have been raised to below the low of the day.

As the price works into new highs, look for supportive price action. In addition to confirming the price movement it also provides an area to raise your stops.

ARM 35 Reversal

Negative Expectation Breaker

Date: June 20, 2024

Daily: Bearish formation. The price gapped down, made a new low, and closed near the low of the day. This is a negative expectation breaker and the stock likely needs time to chop around.

Oliver exits the trade.

ARM 35 Reversal

Wrapping It Up

ARM was a known IPO that had an incredible advance and was part of the strongest sector in the market.

After a Wedge Pop confirmed the Reversal Extension and the moving averages began to support the price, Oliver entered ARM on a daily breakout of a weekly resistance area.

As the price extended into key resistance areas, Oliver reduced his position. Selling into strength allowed the moving averages catch up to the price as it worked higher.

The trade was ultimately sold into a bearish candle formation as the stock advanced over 30% in under three weeks.

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