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Wednesday, April 18, 2007

TRMS - 041807; 15-minute chart

1.) What did I see?
A gap up and wide-range first bar. Price consolidates below the OR high, and over the course of the next dozen bars moves back up to that level. The thirteenth bar closes above the OR high, forms a hammer-type candle, and has support from a rising 5MA.
2.) What is the entry?
A break of the thirteenth bar high.
3.) What is the exit?
The target was the Fibonacci extension of the previous day's low to the OR high. It was hit five bars later.

TRMS was a lower priced stock with good volume...the return for this move was over 5%.

Set-up grade = "B+"

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R.J. said...

ISIL was like the old bread and butter set-up you used to trade. I know you don't trade it much anymore, but this one worked for me.

greytrader said...

I took TRMS off my list this morning because of the range of the first bar. (Same with OSG actually :-) )

Are you still avoiding wide range first bars ?

There was a huge volume surge on this stock, does it validate the wide range ?

John said...

I am allowing more wide-range bars after reading some of Jamie's stuff. I still watch them in general, as I agree with X that it indicates the stock "shot its load" in the 1st bar.

Saying that, when I look back at TRMS price action, it has a tendency towards wide-range bars. That makes a difference too.

Anonymous said...

I think entering a wide-range bar is just like entering below the OR high - there is more risk, but you can do it if you handle the risk properly.

If the stock has a history of wide-range bars and the pattern looks good, I will take the increased risk.

At the same time X is right when he says a really wide-range 1st bar runs the risk of having made the entire move, and the stock may move sideways the rest of the day.

Tom C.

Prospectus said...

I also passed up these stocks, along with SMSI (which was a great X short in retrospect--break of 13th bar low on 15 min chart) due to the choppiness of the first few bars or so, along with crazy wide bars with big tails, etc.

I guess the moral of the story to me is this: A strong closing candle, either crossing important support or showing a reversal pattern, is the most important factor in a setup. The 5-ema support is a close second. The other factors like wide range bars, below the OR High/Low etc. are warning signs, but not reason enough to write off a good setup. Just manage the risk and go for it if the other pieces are there. Don't write off a stock just because it does something weird during the day. A good setup might appear later on, like in SMSI. That's my takeaway.