Once in a blue moon, some type of news comes out in the world in which the market overreacts, particularly for events that can be considered not normal. On April 18th we traded BRZU, an ETF representing the country of Brazil.
Scandal in Brazil
Now Brazil got rocked by news that their President was involved in some type of bribery charge. In the morning I was scoping out EWZ, the ETF for the overall Brazilian market. When EWZ opened up, it just got flooded with sell orders crashing down 15%. Now, 15% for a country’s ETF to drop is a huge move. When the US markets drop 1% everyone thinks it’s the end of the world!
Trading BRZU
It definitely catches my attention and I noticed EWZ was getting close to a daily support level, at $31. We watched EWZ but traded BRZU because BRZU is the 3x ETF for EWZ. It gives you extra leverage. Keeping in mind that EWZ was near support, I see a double bottom in BRZU and take it long once it broke above its trend lines. Due to the huge range, I initially only took 100 shares at $24. But as it breaks above the 9 EMA at $25, I added another 100 shares with a target at $28. We scaled out along the way.
Now that our morning setup was done, we were looking for an end of the day run. Once the stock starts hanging out above the VWAP near the close, it becomes very bullish to me. The VWAP becomes our line in the sand. Late afternoon the stock pops and starts to flag above the VWAP. Once it breaks above the flag I add 100 shares. As it broke higher, I keep adding to my position. Then boom it pops to $27 and we scale out while keeping our core position. Now that the momentum is pouring in, we’re looking for the big move. The stock flags again along its 9 EMA and I re-add 500 shares. The 9 EMA acts as your propellant, while also manages your risk. I scaled out at $28.40, $29, and sold the rest at $29.47.
Remember it’s all about the range. In a stock with large range like BRZU, trading just 100 shares can give you $100s in profit. If you’re not sure of the steps and practices that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at kunal@bullsonwallstreet.com today!
