Now, let’s combine everything we’ve studied to compile trade executions. We’ll do this in a Playbook format – this is how you’ll log and categorize the trades that made the most sense to you each workday in order to grow your business. Let’s start with the UPS setup and trade you’ve already witnessed.

Big Picture

After the failed breakout of the December all-time high, SPY erased half of the leg from the January lows but found support at $595 and is now balancing.

SPY couldn’t hold above $605 and was balancing between $600 and $605.

IYT (Transportation ETF) is weaker than the market: 1) unlike SPY, it cleared the October low during the December down move; and 2) it could not make a new high as the market did.

Fundamentals

Trading information:
Capitalization: ~$90B AvgDailyVolume: ~4M Float: ~850M ShortFloat: ~12M (1.7%)
Industry: Integrated Freight & Logistics Indexes: SNP500 ATR: $2.47 RVol: ~17

News:
UPS UPS beats by $0.22, reports revs in-line; guides FY25 revs below consensus
Co Reports Q4 (Dec) earnings of $2.75 per share, excluding non-recurring items, $0.22 better than the FactSet Consensus of $2.53; revenues rose 1.5% year/year to $25.3 bln vs the $25.41 bln FactSet Consensus.Consolidated Operating Margin of 11.6%; Non-GAAP Adjusted Consolidated Operating Margin of 12.3%. Co issues downside guidance for FY25, sees FY25 revs of ~$89 bln vs. $95.03 bln FactSet Consensus.Operating margin to be approximately 10.8%. Today the company announces the following set of strategic actions: First, it has reached an agreement in principle with its largest customer to lower its volume by more than 50% by the second half of 2026; Second, effective January 1, 2025, the company has insourced 100% of its UPS SurePost product; And third, in connection with these efforts, the company is reconfiguring its U.S. network, and launching multi-year “efficiency reimagined” initiatives to drive approximately $1.0 billion in savings through an end-to-end process redesign. The company is planning capital expenditures of about $3.5 billion, dividend payments of around $5.5 billion, subject to board approval, and share repurchases of around $1.0 billion for 2025.

This is bad news – the company beat EPS by 9%, but revenues are in line, and more importantly, it guided full-year revenues down by 6% with a falling operating margin.

Setup

The stock broke below the $122 support. The last time it traded around the $115 level was back in 2020. After the gap up in July, the stock slipped to $114 and never traded below $113. We also see previous resistance that became support at $107–108, and a stronger level at $100.

Since the report was released in pre-market, there was little to no after-hours price action. In pre-market, we see that the stock broke through the $122 level and then found support at $113.

That’s an A+ opportunity because the news includes a -6% full-year revenue guidance, falling margins, a gap that broke multi-year support levels, and the industry being weaker than the market.

Trade

After the open, the stock dropped $5 from $118 to $113 and never retraced more than a buck and a half from that support, testing it 6 times.

This is an A trade (A+ would be if the stock is less than 2 ATRs before the breakout). An A+ setup with an A trade means I would risk 35% of my daily stop loss ($200) on that idea, which is $70.

Considering slippage of around 25c, I would take 50 shares at $113.50 on my first entry. Then, I would add 50 more shares on a level breakout and place a hard stop loss for all my size at $113.11.

Tape

The tape is filtered, with no sizes below 500. In the first 2 minutes, it’s very clear that the stock rejects $113.50, and at 5:40, when sellers started to sell at $113 support, I would initiate my position and place a hard stop at $113.51. After the breakdown, the stock met a buyer at $112.80, so I would get my size with a 99% chance, even with the uptick rule turned on. After that, the $112.80 buyer dropped, and the stock went to $112.60 but then spiked back to $113, a potential resistance, and rejected it. Therefore, I should NOT move my stop to break-even until my first target is met.

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