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Friday, November 03, 2006

DO - 110306; 15-minute chart

posted by Tom C:

I caught an interesting late day play in DO. It was a Trader-X "beyond the Fibonacci extension" set-up with support from the rising 5MA (more kudos to Trader-X)!

I saw no reason to sell until the last bar of the day (when it broke the previous bar's low).

More charts over the weekend. Feel free to post in "Comments".




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13 comments:

John Wheatcroft said...

Hey Tom and X,
I played HANS (long) Friday. I don't normally pay much attention to volume but the hammer-like critter in the 9th 15 minute bar had a significant amount of volume and it looked like a blow-off. What is interesting about this trade from a teaching experience is that the 30 minute bars reflect the same concept of blow off bottom at the same time.

I waited for the confirmation and took the trade 15 minutes later. Held it to end of day. I'm not sure about the Fibs because I still don't have a good feel for how to set them up. But I pretty much knew from the price action that it wanted to go higher.

Take a look for yourself.

NoGreedNoFear said...

Nice trade John !

Since HANS did a small gap down from the previous day close we can draw the Fibs from the previous day high to today's opening range low. It seems like the hammer (15 min, 9th bar) found support at Fib 19 and it closed at the end of the day just above Fib 62.

For a setup like this how can you know if the SMA 5 and later the SMA 34 won't act as resistance on the way up ?

KayakHandy said...

John W. That was some fancy chart reading you did and in my opinion you enetered the trade a little early but it worked in your favor and how can you argue about that?

I have done this in the past also but only put on half of the position and really keep the stops squeaky tight to be extra risk careful until full confirmation comes along, then take the second half position.

I would have waited until the break on the 16th bar 15min.or the 8th bar 30min. chart to make the trade which in this case I think is a better confirmation of the trade for several reasons...the volume you spoke of was a good tool and clue but the 5, 10 and 13 periods were still heading downward to flat until the confirmation bars spoke of earlier, then HANS started to climb with the 5 MA... With stocks like HANS that have been in nothing but a down trend I always like to wait for solid confimation.

It is also interesting to note that as the day progresses the volume increases along with the stock price...always nice to see for a long side trade! For a day trade, you sure did exit at the top.

I like to let the market tell me where it wants to go but I will make a prediction on HANS for Mondays open, it will be a gap up crossing the 34 day SMA...Maybe even touch the 50 EMA, followed by a failed move and going lower.

Take a look at GMRK...that was one of my 50% position swing trades made on Thursday at the 61% retrace of the Fib. from Wednesdays low to Thursdays gap High...a small hammer formed at the 61% fib line from a major failed gap upward. The 50% position was made shortly after the hammer with a stop at the previous low of the day with the hope of a break out upward on Thursday, then I would have added the other 50% position...it did not happen but no real sellers came in at the end of the day and my stop was not hit. GMRK already reported a kick ass Q report and the trend for this stock has been nothing but up. On friday GMRK gapped up again and allowed for another entry or profit taking oportunity at the newly figured Fib Extention. GMRK went passed the new Fib target...thats when I sold but this stock still has higher to go. The R ratio was golden... Word of caution, GMRK and stocks like it are traded very thin and can be manipulated so be ready for it.

KayakHandy said...

nogreednorfear,

None of us can know if the 5 period MA or 34 will act as support or resistance until it breaks through or fails... In the case of HANS I would look to the left on the chart and look at the trends and previous levels of support and resistance....as mentioned before the odds are that HANS fails again but its always smart to let the market tell you where it wants to go and not make predictions, act only on what the market confirmation tells you.

Hope that helps.

NoGreedNoFear said...

kayakhandy,

GMRK : sweet...

Have you guys seen RYI (30-min chart) on Friday ?

It did a nice green hammer on the 38% Fib extension (prev day high to OR low) and rallied up to the 100% Fib retracement ! I could not get myself to take that trade because I thought the SMA 5 and later on the opening range low would act as resistance.

Would you guys have taken this trade and if so where would your entry point be ? Would this setup be considered a B&B setup even if it is a long on a gap down ?

KayakHandy said...

nogreednofear,

If my scanners would have picked up RYI I certainly would have looked at it seriously after that hammer on both the 15 and 30 min. chart and when it took off upward an ALERT would have sounded telling me to pull the trigger. I would like to add that as the stock rallied so did volume plus RYI trades at least 500,000 shares a day...very good risk reward ratio.

Maybe this was not a total bread and butter but its a trade I would have loved to have made.

You spotted a good one in RYI that picked up steam heading in the right direction...next time make the trade, set your stops and honnor them. You got the right idea!

John Wheatcroft said...

That RYI was a beautiful set-up on the 15's too - An NR7 followed by a very crisp hammer - wish I'd have seen it. I would have taken it on the confirmation at about 23.50 and sold it around 24.30 towards COB.

Couple things on the HANS trade - first - I only use EMA no SMA and if I'm on 15 or 30 minute basis I just use them as guides not support or resistance - it is a personal thing nothing more - it's my comfort zone. Once in a trade the only thing that matters (to me) is where are we now and what is the action telling me. Second - and this might scare the pants off of some of you - I seldom use stops (and did not in this case) unless I'm going away from my trading station for more than a minute or two. Once I'm in a trade that is where I am - to the exclusion of just about everything else. If the price turns and appears to be on its way away from where I want to be - I sell. Third - I trade HANS frequently enough to understand how the rest of the HANS trading community behaves in various price formations and I rely on that behaviour especially when it appears to be roundtripping as it did later in my trade. I sold it at 30.18 which was a dime off the top and I made some beans - which is what I do just about every day.

Thanks for the info on the Fibs - I keep trying to use them but for some reason or other can't get it right. Annoying as hell since I know how to build them just the top and bottom selection always throws me off.

Sorry I have no opinion on GMRK - it is not my kind of trade but I'm glad it worked for you.

NoGreedNoFear said...

John & KayakHandy,
Thanks for the advice, next time I will pull the trigger.

Kayak,
As for not using any stops, you are not the only one. I went to visit a trading room once and the main trader there had access to 10 million and he too did not use any stops. He did not leave his desk to go to the bathroom either :)

"I trade HANS frequently enough to understand how the rest of the HANS trading community behaves in various price formations".

To me that's what I find most surprising. So do you think each stock has it's own "personality" like some say in the trading literature ?

John Wheatcroft said...

As to personality - yes but not the stock - the traders who are gaming the stock. I have about 40 momo stocks on my watch lists and I trade the same dozen or so frequently. I think that most traders do the same - if I'm faced with taking a trade in a newbie or one I already know - I'll take the one I already know. It's my comfort zone - it's what works for me.

I know that many other successful traders just take what is given in their scans and run with it. I can't trade that way.

I am constantly revising the list and new favorites rise to the top and old ones are taken off. For example when oil drops I play CAL or AMR. If GM dips I like to play GM - I like to play HANS - I played it 3 times last week. NTRI is a good momo trade on a dip. That's because there are a 1000 other traders out there gaming the same stocks waiting for the same opps - and when they see them the stocks go up.

And I may be good but Trader X is the master - He and Tom are the best there are as far as I'm concerned. I was flailing around in the dark making some in swing trading but not consistently. Then I found this site - instant turnaround.

NoGreedNoFear said...

Very interesting...

Thanks John !

KayakHandy said...

Hi John W.

My personal opinion is that you are using a type of mental adjusting stop...you are watching every tic of the stock so it's not a problem...this is fine as long as you have the discipline to perform like a machine and only have one or two trades going at the same time. This works for me also on slow days when only one to four day trades are going and there are no swing trades to watch at the same time. However most times that is not the case for me...I have on average 16 to 32 trades going at one time overlapping each other...some of these are day trades and some are swing trades. Plus I am watching the broader markets, sectors, ETF's, indexes and overseas markets...plus the trades overseas looking for other trade setups. Doing all of this requires at least four computers with multiple monitors and two seperate high speed internet connections plus a slow dial up connection/computer as backup ...I even moved to one of only two towns in WI that are allowed to operate their own highspeed communications network to act as insurance.

The point is that with all this going on at the same time setting stops is one of the most important disciplined habits a trader can get into...I have missed a couple of those mental stops and payed for it!...just last week.

One good thing about mental stops is that they are hidden from the market makers, specialists(CROOKS) and certain exchages with very sophisticated software to manipulate securities for the short term...Wait a minute there is no manipulation going on" 'how could one even think such a thing LOL.

The GMRK trade example was just to point out how good a pyramid positioning system can be to limit risk on a trade that might not work out.

John Wheatcroft said...

Kayakhandy - I prefer one or two big trades per day to a lot of trades regardless of size. When I took a lot of trades I didn't do very well - I discovered I was trading mostly for break even purposes - broker was getting rich while I marked time. My style evolved as a result of practice and yes I use mental stops - I know my pain tolerance and it isn't very much.

Good trading this week.

BL said...

Good reading Kayakhandy's and Wheatcroft's opposite styles of trading. Each has studied themselves and the market to get the feel for what works for them. Thanks for your clarifications.
BL