Thursday, March 24, 2011


Tuesday I did quite some research after-hours and I had an 'Eureka'-moment. Another one followed yesterday and even this morning a new idea occured to me, concerning the setups I've traded lately (see: Monday, Tuesday, Wednesday).
Here are my conclusions!

A quick word on the tools I use. As I mentioned before, I believe it was last Thursday, I purchased a subscription to Trade-Ideas, a great way to scan for setups and all kind of situations / candlesticks / volume / patterns and so on! I look particularly for opening gappers on big volume with momentum that keeps going. Also a pre-market scan can give you a possible candidate-list of stocks that are moving up/down big on news, earnings, up-/downgrade etc.

Now, let me start with my entries. Most of them are rather mediocre and need some finetuning! Even from yesterday's trades, only GILD had a good entry. One should wait for the 5EMA and 9EMA to line up, as well as the 20EMA. Best entries are when the 5EMA moves closer to the 9EMA in a sideways fashion, in other words, when price consolidates sideways. If 20EMA has catched up price after a similar sideways price-movement, another great opportunity can occur. Entry on break of the base or last high. Ideal candlesticks to enter from are of course hammers.

Some examples from yesterday, let's assume we monitored the stocks from the open. On the left the 5m-chart, on the right the daily chart that show you how strong the stocks are behaving, compared to sector/industry and overall market-indices.



Mind you, yesterday was kind of a trend day (apart from the first hour and a half). So don't expect stocks to give you that many entries all the time. These were stocks that just kept rallying all day long. These are rather exception than rule, even on trend days.
On a choppy day like Monday or Tuesday, you are more likely to find only one or two good entries. So if you miss them, pass on! Look for another entry or another stock, but don't take a B-setup when you should be looking for A+setups! Better not to trade than to lose money (or as they say, cash is also a position).

Pivot points
I have them on my charts for quit some time now (on the lower timeframes anyway), but never really used them as I should. Maybe I was too focused at price or P&L (not anymore, my spreadsheets stay closed now until the day is over!)  You can see in the previous examples how price often formed a base or put down a hammer right on a R1-, R2- or R3-pivot point. Here's another good example, IRM, also from yesterday (5m-chart):

Price based on R3 and gave a low risk entry, and also created a NRIB (narrow range inside bar) on the 15m-chart. Price then shot up and found resistance at 31 (round number). Of course there was an earlier entry possible on the hammer right in between R2 and R3.

Good entries aren't always that obvious, but what about the exits! In most trades from yesterday, I exited partially when the next pivot point was touched. Another way is the use of Fibonacci-lines. They can give you a target or a clue were to possibly exit, especially when price already passed R3 or S3. But beware, first you have to look for daily and other possible support/resistance (moving averages on the daily chart, major  support/resistance etc.)

Another thing I would like to examin; wide range opening bars on gap ups. Trader-X gave me that idea with his last post. (By the way, he also uses Fibonacci-lines, for entries as well as exits)
Let's see how we can scan for such setups.

If you have any questions or criticism, please feel free to comment. That way we can learn from each other. Thank you and good luck!

No comments:

Post a Comment