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Saturday, May 02, 2009

COT - 050109

Posted by Tom C.

I had to make at least one more post before Trader-X returned from vacation. It was a strange week for me - I had Internet connection problems two days out of five (I hate Time Warner Cable), and a complete power outage one morning. I actually traded from a Starbucks one morning, and it was my best day. Go figure.

Yesterday COT presented an opportunity that we wait for as traders (or at least I do). I spend most of my time getting base hits, but this was a home run.

Price gapped up and consolidated in the upper half of the morning's range (as indicated by the first three bars). For the first three hours, it moved sideways and made what I always think of as a "slim jim" (you older traders will recognize this as a term from Kevin Haggerty in the old Trading Markets days (circa late 90s early 2000s!)).

It made a perfect breakout at 12:30, rallying off of the 8MA and closing above the OR high (as indicated by the black horizontal line). And the candle was solid green - open at the low and close at the high. I entered on a break of that candle's high (as indicated by the yellow arrow). Price exploded after three bars of consolidating that move.

When a situation like this occurs (ie, a parabolic move), I keep my exit strategy simple. I look for price to close below the low of the previous candle. I exited as indicated by the white candle. It was a high volume mover and a 25%+ gain from my entry.

Have a great weekend!



Anonymous said...

Wow. Very nice Tom C.

Anonymous said...

Hi Tom,

Great Trade! I hope you keep posting after trader x comes back.


Trader-X said...

This was a great trade Tom.