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Friday, February 13, 2009

It's Friday!

Monday is a market holiday, so I hope everyone is prepared for an extended weekend. I am actually feeling a little ill, so I will probably spend most of my weekend resting, catching up on charts, and watching episodes of "The Office" (and other shows that have been on my Tivo for months).

A trade from yesterday was APOL. It was a similar setup to DLR (posted on Tuesday), but better from the standpoint that it had more room to run before running into prior day's resistance.

Price gapped down and rallied off the low. The fourth and fifth bars pulled back, but not very deep. I would have preferred a deeper pullback, but the added risk was somewhat offset by the lower tails on the third and fourth bars and the nicely formed doji-like candle on the fifth bar (it was also the narrowest range bar of the morning (NRM)).

I went long on a break of the fifth bar's high and closed the position at the FE. Note how the FE lined up almost perfectly with the low from two days before, signaling that price was running into strong resistance.

I will post a few more charts over the weekend.



Joe said...

Trader-X, I would like to get your thoughts on KO. 4th bar hammer, 10-minute chart. Would you have taken it and why/why not?

Thanks for a GREAT blog.

Trader-X said...


If you draw a line at the halfway point between the high and the 50% retracement of the first 30-minute's range, you will see the hammer formed just below that level.

The next bar tried to break through that resistance, but failed and left an upper tail. Price then fell back to the 50% retracement and rallied off that level, breaking earlier resistance and moving to new highs.

There is nothing wrong with taking the hammer entry if you accept the higher risk of having resistance just overhead. Sometimes it will break through, sometimes it will not. A more conservative approach would be to wait for a better entry later...knowing that you run the risk of missing a few setups that will take-off right away.

OONR7 said...

X... going back to your answer for Joe. You mentioned the halfway point between the high and the 50% retracement. Do you find that fib. level (25%) a good area of support/resistance? Thanks.

Trader-X said...


Yes, that's why I started putting them on my charts (the white dashed lines). I always wondered why price would fail at certain points and not hit my targets...now I realize those levels are responsible.

It is especially useful to me now that I am focusing on intraday and only trading the first few hours (usually).

OONR7 said...

thanks X... seems to be pretty reliable on may different timeframes as well. It's a good place to get on the train early.