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Tuesday, January 05, 2010

CERN - 010510

Posted by Tom C.

I am going to try and post a few daytrades every week, and a few longer-term trades every month. We'll see how long I keep it up! I am going to be on vacation most of February, so I hope to start strong in January and pick it back up in March.

My daytrades are somewhat boring, and I usually trade the same handful of setups. I occasionally tweak my MAs and some support/resistance lines (for instance, marking the halfway point between the low and retracement zone (RZ), the high and the RZ, the high and the Fibonacci extension (FE)). I usually trade 10 and 5-minute charts, but sometimes look at and experiment with other timeframes. But for the most part, the setups are consistent.

I traded CERN long today - the Fibonacci lines are plotted over the previous day's low (PDL) to the opening range high (ORH). It gapped up and pulled back to form a version of the "u-turn" setup (though sloppy). I actually entered as price found support at the 8EMA and moved back up through the ORH. My entry was on a break of the 15th bar's high, though there was some good entry points prior to that. Since price had already closed above the ORH and pulled back below it, I was bullish on the move back above and felt confident it would run to the FE. Price rallied from my entry and hit the FE a few hours later. Because price action was strong, I actually held for $88.00 and closed the position at that level (see my previous post about watching the "whole dollar" levels). CERN continued to rally, but I was happy with my piece of the action.



Anonymous said...

Hello Tom, newer reader to the blog. Thanks for sharing.

Anonymous said...

Tom, how have you decided on using the 8 and 13ema. Is it just based on experience or have you tested? Just curious. Nice trade..

timo4sho said...

Hi Tom,

first off ... HAPPY NEW YEAR and all the best for 2010!!!

Great trade ... where was your initial stop loss on this trade?

Do you trail your stop when the trade moves in your favor? If so ... what strategy do you employ?



Tom C. said...

T, unless otherwise stated the stop is always the opposite extreme of the entry bar. So, the low of the 15th bar. If you wanted to give it more room, you could have done a close back below the ORH, or a break of the 10th bar's low.

Anon, I have never tested MAs, just based on experience. I use MAs mainly to see if price is too extended. Which is why I like when price "snuggles" up to the 8MA and forms a setup. If there were a lot of white space, I would be worried it was going to pullback and the move didn't have legs. I just glance at the other MAs to see if there are any obvious setups that form at those levels.

timo4sho said...

Thanks Tom.

One more question:

How do you scan for your potential trading candidates (e.g. CERN on this day)?


Tom C. said...

I use the standard gap scans in my charting package - RealTick. If you click "WELCOME AND LINKS TO KEY POSTS" at the top of the page, you should be able to find several posts on various sources.

Charles said...

I like the 8 but also the 5EMA. Have you ever tried it? I also use the 100 and 200 for longer term support and resistance. Nice site.