This is the trading playbook where the
charts do the talking and every session
makes you a better trader.
Hello everyone, Lawton here with
Verified Investing back with another
trading playbook. Happy Saturday.
Um hope you guys are doing well and
hopefully you guys have had a great
restful weekend
so far.
Um my name is Lawton Ho, your host.
Before I get any further,
please consider liking this video,
subscribing to the Verified Investing
YouTube channel,
and
and leave me a comment down below
letting me know what you want me to
cover next. Today's video, I think is
going to be
the best, like my favorite, my absolute
favorite um
type of videos that that that that I've
made in this series so far.
And the reason why is because I'm not
just going to cover one specific TA
patterns. I'm going to show you exactly
how I pick out stocks to trade.
And then in tomorrow's episode, I'm
actually going to pick out stocks to
trade for you guys, show you how I do
it, and actually give you, you know,
maybe a game plan going into that,
right?
But with that being said, we can kind of
hop into it
and uh
get right into the charts, shall we?
Get into uh the play.
So, here's what I do. This is the most
common question I get every single time
that I do a video like this. Like a
how-to, like an instructional, like
whatever it is.
The most commonly asked question is,
"Lawton,
how do you find out
what stocks to trade? How do you start
out in the morning and decide what
stocks to trade?
Right?
And the question really boils down to
two things, right? One of two things,
are you looking for a swing trade setup,
right? Something that's going to be a
little longer term.
Right? Are you talking about Or are you
talking about something shorter term,
like a like a
day trade, right? There's also like buy
and holds. And and I'm going to show you
how I do each of them, right?
And I'll give you some examples uh
and tomorrow we'll give you some setups.
But for example
let's say Duolingo.
I I don't really have any levels on
this. Right? The first thing as soon as
you you ask me, Lawton, what do you
think about Duolingo? Cuz this is a
These are questions we get all the time.
What do you think about X or Y stock?
I would say, well, would you buy it here
or would you short it here? And the
answer is neither.
Right? For me to enter a trade,
particularly on a swing, I'm talking on
a swing here.
Right? My I have a certain
qualifications
that these stocks need
to um
need to pass.
Right? For example
in in this case, Duolingo, I see it's so
beaten down from its highs. From its
highs
where is it?
Down about 73% from its highs just uh
slightly over a year ago, right? Like 14
months ago. About 76% down. So, can I
short this?
Kind of hard, right? I'd be more
inclined to buy it.
Right? Cuz my bias is well, it's
oversold, favors a bounce potentially.
But
if you look at the bottom from its lows
in April to where it is now. What
happened? It has bounced over 70% over
68%
close to 70%.
Which you could argue, "Well, that's
overextended to the upside."
So, in this case, I wouldn't short this,
of course, even though it's up 70%. I
would not short this because I think
overall
the power it favors a move higher just
cuz it's
uh oversold, right? Relative to its
position on the chart.
But, that doesn't mean I'm going to buy
it here. The next thing I do is go and
look at different levels to potentially
buy. Where am I anticipating support on
this X stock, Duolingo?
And in this case, right, for a swing
trade, maybe.
Maybe I look at, "Hey, if it comes down
to this pivot, right, this is right
after earnings, the lowest point that
Duolingo got after it dumped on earnings
just last month,
right? Back down to 112.
Boom. 24%, 25% down into that level, you
will find support. You are likely to
find support at that pivot low.
Right?
Additionally,
what is the next level?
Well, for me, I'm looking at the next
low after that. The lowest point it got
all year.
Right? That Now, that would be a big
reversal, about a 40% drop.
But, in my mind, okay, this is my first
level of support, this is my second
level of support. Right? This is what
I'm looking at for a swing trade,
potentially.
Now, am I actually going to take this?
Would I actually take this? I have a
couple other things to consider.
The support's not enough.
I have to look at the overall company.
Right? What do I think about this
company? Why is this company performing
well or poorly, right?
Why did it go down despite positive
earnings, right? Although it did
continue to push up higher.
And then what is, you know, how much do
I actually like this company?
Right? Do I believe in this company?
Right?
Well, first off, Duolingo, you guys
know, is a company that sells software
to or has an app It's a software company
that allows users to learn other
languages. But with the advancement in
AI,
how is Duolingo going to be threatened,
right? Or can they integrate it well?
Right? Or are we just going to have
glasses that are going to automatically
translate everything for you?
Right? There are so many things to
consider. So for me,
I would probably stay away,
right? Just because it doesn't hit those
key qualifications, but maybe if it got
down to $90, this level, I could be
interested.
Now, that's specifically for a swing
trade. And when I started this um video,
I told you that my qualifications are
going to be different for swing trades,
long-term holds, and day trades.
Now, back to Duolingo for a day trade,
this could be a great level for a
bounce. I anticipate a lot of at least
intraday support.
What does that mean? That means that if
price comes down into that level, I
anticipate a bounce
that day or from that level.
Does it mean it can't go lower
afterwards, but just initial pop, boom,
in and out. That's
what I think could happen there at
Duolingo.
But
because we're shifting our mindset from
these longer-term swing trades setups,
it's then I will look for a potential
other day trade levels. I can be a
little more aggressive. And there's a
level here, a nice gap fill from around
$130 that should have come down into
that level, should also provide support,
at least intraday. Now, is it as
powerful as this pivot low after
reporting earnings and the lowest price
it got after earnings? Absolutely not.
Is it as powerful as the lowest point it
got all year? Absolutely not. But, is it
still strong enough to provide a bubble
of support for Duolingo?
Absolutely, it is.
So, now I've shown you what I would do
look for a swing trade, what I look for
in a day trade.
And finally, if I'm looking for a
long-term hold,
this company wouldn't even be on my
radar.
First of all, you know, I have a couple
of criteria that I look for when I'm
looking for long-term investing. Right,
number one, it needs to be a solid name.
Duolingo is okay,
right? It's okay,
but it's not cream of the crop, like
something like Nike, right? McDonald's.
Whether I eat McDonald's, whether I like
the company or not, in 10 years from
now, McDonald's is probably still going
to be around. Duolingo, I'm not sure.
Another thing that I look for is our
dividends, right? Stocks that pay
dividends, you know, could give us a
return
uh in the meantime if we are buying and
holding.
It's one thing to buy a stock and hold
it and sell it to make money, but if
while you're holding it and the value
continues to steadily increase, the the
the stock continues to pay you out based
on the amount of shares you own, 100%
that will have me buying it. And
finally, I'm not really looking for
something too volatile.
Going back to the chart of Duolingo, we
see that it has these massive swings. In
the matter of from April to August, a
few months, it moved up 90%
and in the matter of a couple days, down
18%. Too volatile for me,
right?
Because
I want to be in a position where I don't
have to constantly look at my long-term
investments. I can let my money work for
me instead of having to constantly check
and worry about, "Oh my god, it's up
20%. Oh my god, it's down 20%. Do I have
to add to the position?" Right?
>> [clears throat]
>> I'm not really looking for that
when I'm looking at long-term investing.
Right?
And and that's generally the criteria
and my mindset when I'm looking for
stocks to trade. Now, you can do this to
any stock you want and use all of the
things that we've taught you right here
in previous episodes to determine levels
for day trades, swing trades, and
potential long-term holds. But, it's
about putting it all together
right? On any chart, whatever it is, and
Dooling is just the first chart that I
picked.
Right? To uh
to to to use that up.
But, um
tomorrow's episode is going to be very
exciting because I'm going to give you
three setups, a day trading setup, a
swing trade setup, and a long-term
hold investing setup using these same
factors that I demonstrated uh today.
All right, guys, with that being said,
that's all I have for you today.
Hopefully, that was helpful. Uh don't
forget in tomorrow's episode, I'm going
to give you three
actionable trade setups, one day, one
swing, and one long-term. My name again
is Vlad Ho here with Verified Investing.
Please like this video and subscribe to
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have for you today. I hope to see you
tomorrow and this was the trading
playbook.