Brian Shannon, CMT is an American writer, equity trader, technical analyst, author of the beginner's trading book Technical Analysis Using Multiple Timeframes, and best-selleing book Maximum Trading Gains with Anchored VWAP, and founder of Alphatrends.net, a stock trading education company.
Benzinga's Premarket Prep is the #1 go-to source for everything you need to know before the market opens! Join our expert hosts as they break down the latest market trends, analyze key indicators, and provide actionable insights to help you navigate the trading day ahead.
Benzinga's Premarket Prep is the #1 go-to source for everything you need to know before the market opens! Join our expert hosts as they break down the latest market trends, analyze key indicators, and provide actionable insights to help you navigate the trading day ahead.
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00:00We know you're a very technical trader and you're VWAP, we hear it mentioned all the time. But
00:07before we go into your trading style and the way you approach the markets,
00:12how much do you pay attention to fundamentals? I like to be aware of what shapes the psychology of
00:19the chart. So I'm interested in the headlines. So each morning around this time, this is when I
00:25kind of go through my bunch of emails with all the headlines. And I like to see what's shaping
00:30the psychology of the market. So I actually, you know, Joel, it's interesting that I've said this
00:35before, that I view fundamentals and technicals kind of the same, is that it just tells us what
00:42to be aware of. So, you know, I'll be interested in a chart's fundamentals, not because I care
00:49about the fundamentals, but when I see strong growth in, you know, in revenues and earnings,
00:54I know that that brings about a large group of participants who does care about that.
00:59So it makes me look at the chart and say, well, is it backed up here? Just the same as, you know,
01:04when I see a stock pull back to the VWAP, I'm interested in the stock, but I'm not going to
01:09buy it just because it's touching some, you know, magic number based on the volume weighted average
01:15price. So it all comes down to just kind of, like I said, shaping the psychology and being aware of
01:20what other people are looking at. China, for instance, you know, but I don't like to trade
01:25those stocks because they're just so gappy. Yeah, that's the problem. It's like a headline
01:31comes out from, you know, and again, geopolitical headlines don't have to be war. They're sometimes
01:35something else too, where they just harpoon their own companies sometimes too. So there's a lot of
01:39overnight risk there too. Brian, I want to talk about like, you know, what, you know, and I've
01:44learned a lot from you just following you on Twitter. And one thing I always catch myself
01:48doing is when I'm trying to be a hero and, you know, buy that stock, it's going straight down
01:52because it's going cheap. I remember you always say, don't buy stocks and downtrends. He always
01:57screams that out. I always think of Brian Shannon yelling over me, don't do it. Like I was looking
02:01even at Bristol Myers yesterday. I'm like, man, this stock's getting cheap. And then I think about
02:05Brian, I'm like, don't buy stocks and downtrends. So, I mean, when do you look when the, like,
02:12obviously, you know, stocks don't downtrend forever. At what point in time, you know, do you
02:16look at a stock that's been beaten up and then it starts to trend up? When is the downtrend
02:21actually broken and what timeframe are you looking? Well, so regardless of timeframe,
02:26it's kind of all the same. It's just that, you know, back to Stan Weinstein's stage analysis
02:31really is the way I learned it, which was Wyckoff. But when you look at Bristol Myers,
02:35for instance, it's below a declining 200-day moving average. So to me, that just means it's
02:40toxic. I'm going to stay away from it. There's no need to be involved. I love the phrase, Dennis,
02:46if they don't scare you out, they'll wear you out. And, you know, if you look at, you know,
02:51even like if you look at the NASDAQ or whatever you want, I mean, from the 2021 high, there was
02:59no reason to buy until, you know, it was basically February, March when we had that 200-day moving
03:07average start to flatten out. February, March of 23, that is. And that's when this huge rally
03:13emerged from, and we're still above that rising 200-day moving average. So just to say, I'm not
03:18going to short this market just because I think it's up too much or, you know, on that timeframe.
03:24You can do the same type of analysis on a one-minute chart if you want and go in there and
03:30be a lunatic and find shorts all day if, you know, if that's your timeframe. But to me, it's about
03:36marrying the timeframes and knowing that the larger timeframe is, you know, in Bristol Myers is
03:41still in a downtrend. So I'd rather look to that stock and say, you know, it just bounced 10%
03:48to the declining 20-day moving average. It's starting to roll over on the shorter-term
03:52timeframe. So now I'm going to short this stock. That's the way I look at it.
03:56When you're sitting at the Brian Shannon desk right now and you're looking at your charts,
04:01how many different, like what timeframes do you have? Like we have the 30-minute because we like
04:07the pre-market, we like the after hours and the pre-market action. Dailies are very important.
04:13They don't reflect that. They give you more of a, you know, I mean, less price action,
04:19but more stable than the monthlies. What timeframes do you look at?
04:23Great question. I have on my screen right in front of me, I have four timeframes and those
04:29four timeframes are just like yours. I hit the symbol and they all populate. So I've got a daily,
04:35a 65-minute, a 30-minute, a 10-minute. And then in my upper screen where I don't always look,
04:42I have a weekly timeframe. And in the bottom right, just to the side of it, I have a two-minute
04:48timeframe. I fine tune that stuff. Why the 65 versus the 60?
04:55Great question. You have a good deal about that. The market's open from 930 to four.
05:04So if we look at that and you look at your hourly timeframe, you've got seven candles or bars. One
05:11of those is 30 minutes long. Six of those are 65, 60 minutes long. So you've got one apple and you've
05:18got six oranges. If you put any, you know, moving average, any stochastic, any type of study on
05:25there, what you're saying is that first 30-minute period is more important, twice as important as
05:31every other period. So instead, the market is open. So 930 to four is 390 minutes. So you can
05:39look at a 30-minute timeframe. There are 13 of those periods per day. Or if you look at a 65
05:46minute, 65 times six is 390. So you've got six equal periods, Joel, rather than one half hour
05:55period and six 60-minute periods. So Brian, right now, what charts are starting to look
06:03interesting to you? Any to the downside that you're seeing, oh my God, this is getting way
06:08overextended. I mean, we have stocks at all-time highs, but it still feels like, at least some of
06:13them still feel like there's got room to go. Do you ever look at the charts for short opportunities
06:18or are you mainly going long? No, I do. So I have a small,
06:22short position in a stock called G-Triple-I, which is an apparel company. I looked at their
06:30revenues. I looked at their earnings and they've flattened out. And a lot of these, you look at
06:38Nike and that, why has this stock held up when Nike is getting smashed? So that longer term
06:44chart looks like it has room to the downside. I'm short here for, like I said, with a small piece.
06:51I don't prefer to short, especially we're in a bull market. So I'm more interested in looking at
06:57what's emerging strength. And I think the biotechs are right there. If you look at the XBI, it keeps
07:04knocking at this level. And I think this time, knock on wood, that we're getting ready to
07:12continue higher in the XBI. And I've got more biotech exposure than I have in a long time
07:18through a couple other individual names. Yeah. So when you're doing the biotech exposure,
07:23you go in specific stocks, you trading the XBI, how are you trading that?
07:28Well, I look at the biotechs and I just kind of view them as kind of a toxic group in general,
07:36meaning you see all these little stock. You look at the morning gappers up and down.
07:43Most of the time, the ones that are up a hundred percent are some little biotech stock,
07:48but the ones that are down 60% are some little biotech stock, unprofitable one as well.
07:54So I like to look at the ones that like Amgen, for instance, right now is looking ready to get
08:00going here. And that could help this group. I've been long a little one that is profitable
08:07called Target Therapeutics, TGTX. I've tweeted about that a couple of times.
08:13They've got a new drug that got approval last year. They had their first profitable quarter.
08:20They've got great estimates in here. And there's 26% of the flow is short in here. So
08:27that I think these shorts are about to get roasted pretty good in this one.
08:32Who is it that shorts these stocks? Like who's sitting there on a biotech stock at 26%
08:38short interest here? It's a gutsy call because like you said, these things can gap up a hundred
08:42percent in your face. I'm always nervous. Like I'm a day trader and I will short stocks,
08:47but I don't short any small biotech stocks ever because I know even as a day trader,
08:52you hold something overnight and then boom, it's in your face. It's rare for me to short
08:55biotech stocks. It's a scary thing to short. Who do you think is on the other side? Who is this?
08:59Edge funds? People who know something like who's that 27%?
09:04Someone who thinks they know something. But I mean, you look at the trend here. I mean,
09:09certainly you look at the history of the company in that bottom right corner.
09:13There's been good opportunities to be short this, but now you've got the stock. The company has a
09:20legitimate drug. The estimates are for 76 cents this year. So going back to your question, Joel,
09:27how much do I look at the fundamentals? I know that they have a drug that people are excited
09:32about. They're earning money. The estimates are strong. They're growing market share,
09:38and there's a big short position. You add that all together with a good looking chart,
09:43it just seems obvious here that this one should be able to continue to move higher.
09:46Now I've been involved at lower prices and I've actually just starting to scale out a little bit
09:51up in here and looking to replace if we get a nice pullback because again, it's a biotech stock
09:57and I don't fully trust it. What would you, if someone was just starting trading today and they
10:05wanted to learn the basics of technicals, what would you have them start with, Brian?
10:10I should say my book.
10:14Talk up your book. Literally, talk up your book.
10:16Okay. So my first book is technical analysis using multiple timeframes. And that really allows
10:25you to look at what you're looking at on this screen is recognizing that people will say,
10:30are you bullish or you bearish? Well, it depends. This chart were lined up bullish on all these
10:37timeframes, but some other stocks you'll look at them and you'll say, well, the longer term
10:42trend is down. Look at Baba. The longer term trend is down the last couple of days. It's up.
10:48It's just a mess. Basically, there's no consistency of trend in here. The daily chart,
10:53maybe a little bit more neutral, longer term, still in a downtrend, 30 minute timeframe,
10:59we're perking up. So what is your timeframe is something that's most important because
11:04there's different messages here. So in that book, I spoke about the importance of
11:11knowing your timeframe and getting those trends lined, recognizing what stage we're in. So in
11:18Baba, for instance, on that monthly timeframe, we're maybe in a stage one accumulation.
11:23And if we start breaking higher, this stock will have a lot of room to run. It will probably make
11:30a several year bull market. But right now we're in that phase on the monthly timeframe. If they
11:36didn't scare you out on the way down, they're wearing a lot of people out. And each of these
11:42rallies just gets kind of smacked down, but the range is compressing and maybe the tide is going
11:49to turn here. So it's worth keeping on radar and maybe as Dennis is doing, nibbling on it for
11:55that eventual turn as it might be the cheapest stock in the world.
12:00What are your thoughts on Tesla? And how do you approach something like Tesla technically when
12:05you know, obviously maybe a week or two ago, it was a little easier when it's breaking out through
12:10200, but now you go 200 to 260 in six trading sessions. How do you approach something like
12:15this if you're going to trade it? Or do you just stay away when it's moved up this much?
12:19You know, I nailed the entry at 187, I think it was, because it broke that range and it broke
12:26above the year to date anchored VWAP. And I was thinking, Hey, maybe we'll run to the 200 day
12:32moving average. And that was, you know, a 15 point rally up to, you know, 208 or so. Now I think
12:40you've got to, you know, you look at it and people will look at this thing and say, Hey, it's up too
12:44much. And they'll start talking about all the TSLQ arguments. They're bringing those back out.
12:52I look at it and say, you know, the trends, your friend don't fight it for sure. My thing on the,
12:59on a 15 minute timeframe is a five day moving average. As long as we're above a five day moving
13:04average, I would not go anywhere near this thing on a short sale, even for a scalp. So, you know,
13:10the trend is higher, enjoy the ride. And if you're nervous about it, you know, it's coming into
13:16potential supply on that monthly timeframe. So tighten your stops and then eventually we'll get
13:23a pullback. Maybe it pulls back to 230, starts to go sideways. And then we get another rally,
13:28but I certainly wouldn't be buying it for anything more than a day trade up here.
13:34Brian, over the years trading, you know, you have different things that happen to you. Do you have
13:40like one trade or one series of trades that really like help frame your trading strategies,
13:50like maybe a big debacle or a big winner? Do you have something that like stands out to your mind
13:55once we'd like to give investors or traders, you know, something to learn, something to lead on?
14:01Do you have something that comes to mind along those lines?
14:04Well, I mean, I can talk about where, you know, my losses have come from in general is fighting
14:10trends. And as Dennis said, you know, I don't, I just, I look at a stock in a downtrend and it's
14:16just, it's just poison. I've trained my mind and it took a long time to get there because I used to
14:22be, Hey, look at how much that's down. That's a good company. And you know, I can get the bottom
14:26and I'll average into it. I'll average more into it. I'll get way too big. And I ended up puking
14:31the whole thing out with my largest loss of the year. And, and that happened to me so many times
14:37over the years, or I would look at a stock like Tesla and say, Hey, I'm a smart trader. I can,
14:42I can pick the top in this thing. I can short it at, you know, two 30. Oh, shoot. It's a two 32.
14:47Well, maybe I'll add a little bit more and then it runs away from you. So,
14:52you know, one of my mantras is don't buy the dip and don't short the strength. Don't buy the dip,
14:58but by strength after the dip, let other people do the dirty work of finding that base,
15:04allowing it to turn sideways a little bit. You don't have to be the hero. Let the institutions
15:10who go in with millions, you know, hundreds of thousands of millions of shares, let them
15:14find the bottom in CMG for you. It's not here yet. We're still declining. We're still in pullback
15:21mode. So let them, you know, and Dennis was saying, he wants to see this stock turn sideways,
15:25do this hook that he was talking about and let them do the dirty work. You don't have to get the
15:32bottom tick. And if you get the bottom tick, it just reinforces a negative behavior because
15:38for every one time you get it 99 times, you're not going to, you're going to experience that pain.
15:43And you know, your, your money could be better off in something else as well. So
15:47just don't fight trends is my main thing, especially for a newer trader.
15:53Well, there you have it again, Brian Shannon, joining us on pre-market prep,
15:58I believe the first time ever, but we got to do this again, Brian, I know it's early for you.
16:02So we appreciate you getting up early and hopping on with us, but it was a lot of fun.
16:07Alpha trends on Twitter, of course. And if you want to go check out his books,
16:11you can go give him a follow there, Brian. Thank you again for, for joining us today.
16:15Great to be on with you guys. Thank you for having me.
16:17Thanks Brian.