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Thursday, December 07, 2006

Being creative with the 5MA...

I have posted set-ups like this in the past - a long time ago - but refrain from doing so now. The reason being that they are more high-risk than (read not as consistent as) the normal set-ups I post. So keep that in mind as you look for them...

VNDA had a huge gap up this morning, and the first bar was wide range and left a long upper tail (a bearish red flag). The second bar also left a long upper tail, and closed red. I entered on a break of the second bar low (15-minute chart).

Everyone knows I use the 5MA as support (and a launching pad) for long entries - if price is too far away from the 5MA, I will not enter a long position. That same concept applies for this type of short set-up. Note how price is greatly extended from the 5MA - you can drive a truck through that space! That indicates (to me) price will pullback, or at the very least move sideways to let the 5MA "catch up".

I also use the 5MA as a conservative target - it is wise to take at least partial profits at that point, because price will likely bounce. If it sets-up again below that level, you can always re-enter.

In the case of VNDA, it fell ~$1.20-$1.30 before hitting the 5MA. As of now (12:00EST), it is chopping around that level - who knows if it goes higher and lower? I would like to have seen more profit - and, in a lot of cases you will see a set-up like this fall off a cliff. Consider that if it collapsed in the next few bars after entry, it had room to fall over $2 before hitting the 5MA. Nevertheless, it was good for a quick trade.

On another note, BVF was a great long off the fourth 30-minute bar this morning. Note the support from a rising 5MA, and the close above the OR high. Partial profits taken at the Fibonacci extension, and a break of the seventh bar "hanging man" seems like an obvious place to take remaining profits.

There were several more good set-ups this morning, and I will post a few charts later tonight. RBAK is looking promising...

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Russell said...

Nice on Vnda X.

i had a similar trade on Mtl although i think the risk reward parameters were better on your Vnda.


Russell said...

Entry was under the 2nd bar 15 min low. Re : Mtl


estocastica said...

My comment above was in regards to VNDA.

NoGreedNoFear said...

BVF was amazing ! I saw it but too late to enter. I traded CQB on the Fib extension (38%) at the break of the 16th bar high on the 15-min chart. Sold near the 62% level.

estocastica said...

Hmmm...looks like my original comment got lost in cyberspace, so my second comment makes me look insane. I'm not that insane. :)

Anyway, I mentioned how I pulled my entry on VNDA at the last moment. X, great trade.

Sami said...

GHDX... a little too far from 5MA, but i entered during the second candle on break of OR high at 22.96. it consolidated and waited for the MA to catch up with it, and created what would've been the correct entry. same price, but better setup.
got stopped out at 23.43, as i had to run out and let the market take out my stop.

R.J. said...

At least you knew the risks going in...good trade.

NO DooDahs said...

I'm liking BVF but I'm trading it on a different timeframe - but I do love reading about it!