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Monday, April 20, 2009

AEM - 042009

Posted by Tom C.

AEM gapped up and printed a strong first bar, with the next few bars staying above the halfway point of the first bar's range. I plotted my Fibonacci lines over the OR high to the previous day's low (classic X-style). The 4th bar broke the 50% retracement, but the 5th bar formed an "offsetting bar" and made a hammer-type candle, closing back above the 50% retracement and the halfway point to the high.

I entered on a break of the 5th bar's high (first yellow arrow), and closed the position at the FE. I entered another position on a break of the 11th bar's high (second yellow arrow). It was a classic "beyond the Fibonacci extension setup" (if you are not familiar with the term, search the blog). The 11th bar was also a hammer-type candle, and formed on support at the Fibonacci extension. I closed the position on a break of the bar indicated by the blue arrow.



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13 comments:

Jim said...

Excellent!

Tom T. said...

TOM C - I thought you would be busy going long ORCL - looks just like your BP 041409 setup - thanks for pointing out that type of setup. Thanks for the great posts.

DG said...

Nice setup! This is the kind of trade as a novice trader like me that further my learning. Good post Tom C.

TL said...

Nice trade. I have a question on NOV (4/20). Would you consider it (9/ 15) a "beyond the Fibonacci extension setup"? I passed because it seemed really overextended at that point. It was the 9th red bar and previous 8 all made new low. One thing always confuses me in this kind of setup is that the stock has run a great distance, and I don't know how much consolidation (in terms of price or time) it needs before another leg up or down. What is your experience in that?

Thanks for your time in blogging great trades and answering our questions!

Tom C. said...

Tom T. - missed it. As X says, I miss a lot more trades than I actually make.

TL - I am having trouble with my software right now, so I can't look at the chart. But, I use the MAs to judge if a stock is overextended or not. Especially the 8EMA (white line on my charts); if there is a lot of white space between price and the 8EMA, it is due for a pullback. Hope that helps.

Thanks for the positive feedback everyone!

Luis Miguel said...

Tom, one question regarding the Risk/Reward ratio of this trade: you entered (firts enter) with a risk of 45c (more or less, taken from the chart) targeting a profit of 1,05$ (more or less, also taken from the chart if you were targeting the FE). This is a Risk/Reward of 2.3x, more or less...My question is: do you take that kind of math into account when selecting entries?, in my humble opinion (sorry, you know I'm a newbie and surely I wouldn't have any opinion) this seems not a very brilliant R/R ratio (at least, a great deal of your trades have a better one)...More or less the same holds for the second entry. Obviously all this is taking into account that your stop is at the low of the entry bar. Could you comment something on this please?...

Tom C. said...

Luis, I actually don't look at R/R when I trade. The reason being that my percentage of winners is relatively high. I always have a fixed amount at risk, and size my position to make sure the $ risk is always consistent.

On a side note, if I did look at R/R I would still take these trades. I don't think they are that out of whack looking at them in the traditional sense.

Luis Miguel said...

Thank you Tom, I see your point. What really bothers me is that my % of winners is low and I am always looking to hit high R/R opportunities to offset that low % of winners.

Tom C. said...

Luis, most people do it the R/R way. I am not saying any one was is better than the other. Just that - for me - I can't do a lot of trades with a lot of losers. Mentally I need to do fewer trades with higher probability setups (same as X). But many people out there make a lot of money doing a ton of trades with a high number of losers. So, to each his own!

Luis Miguel said...

Thank you very much for your help.I wish I had a better % of Winners, in my case what you explain about high R/R and low % of Winners it is not an strategy. I hope this is only because I'm beginning to learn this art...

bl said...

Tom C.
You mentioned posting your 1.5x vol TI scan criteria. I looked around and couldn't find it. Would you post. Thanks,
BL

Zack said...

Tom, How do you find these set-ups quick enough to jump on them?

QQQBall said...

beautiful exits on AEM.