There have not been many textbook setups on Monday and Tuesday, rather variations of the setups I posted about last week.
The market began to reverse today on the third 10-minute bar and by the end had already moved off the morning high. So a classic "top out" setup was not in the cards.
But a variation of the "top out" setup did occur in many stocks today. It is a setup that carries more risk, but one that has worked well in 2009. It happens when the third bar closes below the half-way point between the high and the 50% retracement of the morning's range (represented by a white dashed line on my charts). I enter on a break of that bar's low, with an initial target being the morning low and my "stretch" target being the FE.
As always, my stop is the opposite extreme of the entry bar unless otherwise indicated.
MET is an example that I traded today. My entry was a break of the third bar's low, and I watched the 50% retracement for early resistance. The fifth bar sliced through that level and moved down to the morning's low; the sixth and seventh bars moved down to the FE and bounced exactly at that level (I covered at the FE).
You can find many more examples of this setup today, including the NQ futures.
Another variation occurred in ORLY, where the first bar left a long upper-tail and the second and third bars could not close above the half-way point between the high and the 50% retracement. The S2 Pivot Line (yellow line) also served as strong resistance. I covered the position at the morning low (it was a round number ($29) and I had other positions to monitor...otherwise I may have stayed in longer).
In retrospect, I didn't like the first bar on ORLY as it also printed a long lower-tail...it worked out well, but I don't like taking setups that follow a candle with both long upper and lower-tails as they carry more risk.
DLR was a setup I traded on the long side. It can be classified as a "perfect pullback" setup. Price gapped down and moved up sharply with the first four bars. The fifth and sixth bars pulled back, and the sixth bar formed a textbook hammer at support from the half-way point between the high and the 50% retracement (the tail actually tagged the 50% retracement and bounced off that level).
My entry was a break of the sixth bar high, and my exit was the S1 Pivot Line (green line) which was just above the FE. Normally I would exit at the FE, and if price had reversed I would have closed the position. But with the Pivot Line being just above the FE, I knew there was a high probability that price would rally to that level.
Trading 27-April-2016 (+ $66)
22 hours ago