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Saturday, March 17, 2007

Friday's charts

There were some good opportunities on Friday - I am highlighting one short and one long:

TRMS - 031607; 15-minute chart

TRMS gapped down and the first two bars left long upper tails - a bearish sign that the down move was not over. The third-eighth bars slipped below the OR low and narrowed in range, with the eighth bar being weak and the NRM (narrowest range of the morning). I entered on a break of the eighth bar low, and got immediate confirmation on the ninth bar as it left a "hanging-man" candle. There was also overhead resistance from the declining 5MA.

The target was the Fibonacci extension of the previous day's high to the OR low, and it was hit around 2:30EST. This trade was a nice percentage gainer - returning over 10%. I give this set-up a grade of "A-".

ZOLT - 031607; 15-minute chart

ZOLT gapped up and the second bar rallied to close above the OR high. The third-sixth bars pulled back to test the OR high as support (the 5MA also provided nice support). The fifth bar printed a "hammer-type" candle, and the sixth bar was a narrow-range (NRM), inside bar. I entered on a break of the sixth bar high, and sold at the Fibonacci extension of the previous day's low to the OR high. ZOLT kept going and an argument could be made for a "beyond the Fibonacci extension" set-up, but I was happy with my gain.

I give this set-up a "B" because of the long upper tail on the third bar.

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QQQBall said...

awesome trading! you have a couple of real clunkersd on your top 20 movie list :), but congrats on the great trading! nice!

thanks again for generously posting the strategies.

Babak said...

what kind of trailing stop do you use? for example, ZOLT's 9th candle may have triggered a stop if it was trailed too closely.

or do you just put in the initial stop and not move it?

Trader-X said...

babak - good point. For ZOLT, my initial stop was below the low of the fifth bar hammer. I was actually looking for an entry above the fifth bar hammer high (on the sixth bar) - but it did not happen. So I took an entry above the sixth bar high.

As far as trailing stop - I don't religiously use one. I like to give the trade room, so I will keep my stop at the initial place...I watch for resistance at the halfway point between the high and Fibonacci extension, and I usually close 1/2 of my position if I get a dollar gain.

If price really rallies from my entry, I may use a trailing stop of a CLOSE below the 5MA - a close, not just a break of...(of course, if I am short it would be a CLOSE above the 5MA...)

Anonymous said...

did u miss the entry on the 3rd bar on trms or is there a reason why u didnt take it?

Trader-X said...

Steve - I don't see the entry - maybe you can elaborate?

Jim C. said...

Steve - Did you mean 5th bar on TRMS? IMO, a break of 5th bar low with a stop above the 5th bar high would be a valid entry. The only concern might be the distance from the 5EMA.

ADD Trader said...

Hi X,

Can you elaborate on the confirmation with the "hanging man" candle. I have entered, and seen you enter many times a short on the break of the low of a hanging man candle. But in this scenario, why is the hanging man not a hammer (since it is in a downtrend), and a possible sign of a reversal instead of a continuation?

ADD Trader

Trader-X said...

add - I did a post on candlesticks last year, check under key posts. I think that hanging-man and hammer candles can also be continuation signals - it depends on the context. But after looking at 10's of 1,000's of charts, hammers work in uptrends and hanging-man candles work in downtrends given the right conditions...

In TRMS, it occurred below two "levels" of major resistance and was red...in my experience, a bearish hanging-man.

Just because someone writes in a book that it is a reversal signal in an uptrend does not mean that is all you can use it for...trust what you see after studying numerous charts.

Anonymous said...

3rd bar- 2nd bar nrb- consolidated near lower part of first bar- 3rd bar triggered below OR range and new lows- yeah it retraced to close back up leaving a wick below but before it closed it seemed a valid trigger for your style- or am i wrong?

Trader-X said...

It was above the OR high, so I was not really watching it at the time. I see your analysis, and if you took an entry there then you made money...so good job!

Trader-X said...

Sorry, above the OR low...