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Sunday, May 13, 2007

Friday's action

As previously mentioned, the NASDAQ was having data issues Friday morning - charts were not updating and that limited my trading for the day.

Going back to Thursday I wanted to highlight a somewhat riskier trade. FRPT gapped up out of a tight two-day range, and printed wide-range bars in comparison to the bars of those previous days. After it gapped up it made a brief pullback and formed a "U" pattern with the second and third bars. The fourth bar left an upper tail and frequent readers know I like this candle if the overall pattern is bullish - if that is the case and price takes out the high of the candle with the upper tail, there is a good chance for a rally.

The big issue with FRPT was that the entry was below the OR high. But it was a calculated risk given the bullish "U" pattern, the 5MA providing support, and the gap up out of a tight two-day range. I entered on a break of the fourth bar high and price exploded on the next bar. I took my windfall profit and sold at the close of that (the fifth) bar.

FRPT presented a "beyond the Fibonacci extension set-up" as it pulled back to test the Fibonacci extension as support. Note how the ninth bar printed a hammer candle, and price rallied from that point to take out the previous high. I did not take the second entry, but it is worth pointing out for "study" purposes.

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Mark said...

Enjoy your blog - couple of questions:
1. When going to enter a trade how far will you chase it if you dont get filled or partial filled. For example say you have a buy for XYZ at 33.51, maybe u get filled for 1/4 of you order and it just runs another dime before you are able to get in. How do you approach this?
2) Same with shorting since you have to wait for the uptick - how many cents will you got to wait for an uptick. Shorting seems like a war trying to get shares.
3)Also could you talk a little about your set up, maybe post a picture, talk about how many monitors you use.

Thank You - Mark

Anonymous said...

the fourth bar's upper tail:

ive been noticing the same thing on daily charts with similar patterns. in the past, i'd have been expecting a PB, but as i watch more charts, a break above the "bearish" candle seems to be very bullish.


Trader-X said...

Mark, I try to focus on stocks with good volume to minimize that problem. It still happens, of course. I don't have any hard and fast rules...I look at the remaining distance to my target to determine how far I will chase something if I don't get in. 80% of the time I will probably just move on to the next set-up.

I use one monitor - I don't do the 6 monitor set-up anymore. Sometimes I trade off my laptop.

QQQ - yes...I actually have been talking about that for a long time. Your observation is correct given an overall bullish set-up.