Anatomy Of A Trade: MU +20% Wedge Pop
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 13, 2024
MU made Oliver Kell’s focus after it gapped up 18% in reaction to its first positive earnings report in over a year. This strong action pushed MU into new all-time highs.
The current market theme included semiconductors as a main component of the Artificial Intelligence build-out with other related stocks performing strongly. In harmony with NVIDIA (NVDA) and other semiconductor stocks, MU highlighted the importance of their new technology as the stock price entered new highs.
This trade review shares Oliver’s thought process and trade execution throughout MU’s late-stage base.
Monster Gap Up = Street Caught Off Guard
Oliver Kell began watching MU closely after the price gapped up to new all-time highs after gapping up 18%
When a gap up is missed it is best to let a pattern develop instead of chasing a stock extended in price.
Date: May 2, 2024
Two weeks before Oliver shared this setup, MU made a Reversal Extension, gapped up, and tightened into the moving averages. After a failed breakdown, the price is now sitting inside the wick of the previous candle.
Enter On The Wedge Pop
Date: May 3, 2024
MU gapped up in the form of a Wedge Pop through the moving averages over the previous flag formation.
Initiating a new position, Oliver staggered his stops with the 10 and 20 exponential moving averages under the day’s low. Waiting for tightness in price and then acting quickly on positive price action offers low risk with tighter stops.
Reconfirmation Higher
Date: May 6, 2024
Entering on a wedge pop puts you in the trade at the beginning third of the Cycle Of Price Action.
When the stock immediately moves in your favor, the market is providing feedback that the trade is healthy and to let it trend. Being early in the trend allows you to sit through normal reactions after constructive price action.
Raise Stops When A New Range Forms
Date: May 10, 2024
When letting the cycle play out look for new opportunities to add and raise stops.
At every new formation look for supportive price action along the moving averages and previous support and resistance areas. After positive price action confirms strength, look to raise stops below the low of the base allowing the moving averages to support the price higher.
This EMA Crossback provided an ideal opportunity to raise stops and potentially add.
Unfilled Gaps = Strength
Date: May 13, 2024
We now see our 4th gap up as MU forms the right side of its base.
Entering new positions here when the price is extended becomes difficult as there is not a tight area to manage risk against. There is nothing to do but let the stock trend higher.
Watching For A Higher Low
Date: May 22, 2024
Oliver noticed the trend is riding the moving averages higher and no real higher low has been developed yet.
The semiconductor leader, NVDA, will report earnings soon as MU forms a range in a bull flag near its previous highs.
Oliver makes plans to allow the price to chop around while looking for the 10-day exponential moving average to support the price. If MU has a positive reaction to NVDA earnings it may provide an opportunity to add.
Reversal After New High
Date: May 3, 2024
MU gapped up and sold off all day.
When the price action acts abnormally to your plan, be prepared to be flexible with your actions.
Oliver uses this as an opportunity to raise his staggered stops below this action under the 10 and 20-day exponential moving averages.
Base n’ Break
Date: May 28, 2024
The Cycle Of Price Action is clearly evident now.
The previous inside day set up a positive expectation breaker against any weakness here.
MU is breaking out of a traditional cup and handle formation into new all-time highs. After new highs, Oliver lets the trade work while looking for areas to reduce and raise stops.
Breakout Failure – Sold
Date: May 30, 2024
After an inside day the price heads lower.
Oliver initially reduced his position and ultimately sold as the intraday price structure weakened and viewed this as a Wedge Drop.
The result of this part of the trade ended with a 12% gain in three weeks.
New Setup
Date: June 3, 2024
A few days after the Wedge Drop took out the first trade, MU found support at the EMA Crossback level. The large lower wick on the previous candle suggested accumulation as the price closed near highs after the 122-123 level was supported.
Oliver re-entered MU on a gap up above the moving averages as he noted relative strength throughout the day.
Raising Stops on Reconfirmation Higher
Date: June 5, 2024
The previous session took some heat with group weakness on another semiconductor earnings report, but Oliver stuck with the trade.
Another gap up brings the price through previous highs. This is the area that needs to hold and stops are quickly raised.
Pushing Out With Authority
Date: June 12, 2024
The 10-day exponential moving average held the backtest and the price pushed off support.
When the price moves out of a range like this be quick to raise stops along the way.
Make A Plan For Earnings
Date: June 17, 2023
After a quick consolidation, MU reconfirms higher on volume. Stops are raised and a plan is made.
Earnings are next week and Oliver is set to hold through them but will look to reduce into strength along the way.
To hold through earnings, the price should be significantly higher than your cost basis, providing a cushion for sudden price movements. Additionally, you should decrease your position size to secure some profit while lowering your total risk as you prepare for increased volatility.
Reduced Into Exhaustion Extension
Date: June 19, 2024
This Exhaustion Extension provided an ideal opportunity to reduce the position into strength. The volume is at its highest from the entire move off the bottom.
Oliver reduced his risk down to “earnings size” to allow for the volatility that may come.
Bearish Engulfing
Date: June 20, 2024
After an extended advance, this type of price action is not normal.
The price gapped up making a new high, and then closed below the previous candle.
A bearish engulfing candle as the price is extended is an immediate sell signal.
The result of this part of the trade ended with a 20% gain in under three weeks.
Wrapping It Up
MU gapped up into new all-time highs and is part of the prevalent semiconductor market theme.
Oliver entered MU on a gap-up Wedge Pop as the price reclaimed the moving averages.
The original position was sold near highs when the first breakout attempt failed and lost the moving averages.
Staying flexible, Oliver re-entered the trade after the price found support at the previous EMA Crossback area.
When MU broke out into new highs, Oliver sold into strength to prepare for earnings and ultimately sold his position when the price action failed.
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