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Saturday, February 05, 2011

Chart roundup

Here are a few charts from me with a comment on MAs, and a chart from Ray with a question on how late in the day I enter trades.

Friday I had several "beyond the Fibonacci extension" trades - TSO and SIMG were the best. Before I show the charts, I wanted to address several questions on MAs. I plot the 8 and 100EMAs, and I use the 8EMA as a guide to help determine if price has extened itself too far and too fast. If there is a lot of white space, I wait to enter until the 8EMA "catches up" with price; otherwise, you may enter only to get nailed by a pullback. The problem is that - in a fast market with strong price movement - price may not "catch up" with the 8EMA, and you will miss the move. As a result, I also keep an eye on the 5EMA (I don't go any shorter than 5). I usually don't show the 5EMA on charts I post here because it probably only factors into 1/4 of my trades. In the case of TSO and SIMG, it factored into both. Note how on both charts the 5EMA (light blue (turquoise?) line) provided nice support in conjunction with the other factors noted:

1.) Fibonacci lines plotted over the previous day's close to the current day's open.
2.) Entry on a break of the fourth bar's high.
3.) Fourth bar was an offsetting bar, closed above the Fibonacci extension (FE), and had support from a rising 5EMA.
4.) I watched the $21.00 level closely for resistance. Had price showed signs of stalling, I would have closed the position. But it remained strong (price never closed below the 5EMA) and rallied to $21.50 where I closed the position for a 3%+ gain.

1.) Fibonacci lines plotted over the previous day's close to the current day's open.
2.) Entry on a break of the seventh bar's high.
3.) Price was very strong from the open, with a minor pullback that didn't break the 50% level of the morning's range. The seventh bar closed strong above the FE, set a new high for the morning, and had support from a rising 5EMA.
4.) $9.00 was my exit. A ~5% gain in 20 minutes...a few of those a week, and you have a trading career!

Ray wrote the following:

"X, how late in the day do you enter a trade? I know you like to trade the first hour, but do you ever enter beyond that? I entered CIEN when it bounced perfectly off the Fibonacci extension and rode it to the end of the day for a nice gain. In your opinion, was this a good trade or did I just get lucky? The chart was 5-minute, and I entered on a break of the 24th bar, with my lines plotted over the previous day's close and the current day's open. Price was below the 8EMA, but the bounce was perfect so I took the chance. Thanks, Ray"

Ray - based on my experience, the exact same setup has a lower probability of success as you get later in the day. Does that mean you shouldn't trade it? No, it all depends on your style and what you are comfortable with. Many people make a good living with 50% "losers" and solid money management. If you are a long-time reader you know that, psychologically, I have problems with that style. That is why I have tried to customize my trading to give me a higher success rate - generally above 80% and often higher. So, I would not take this trade based on that philosophy. Kudos to you however!



Javier said...

Great trades and great post TraderX, very informative. That is why I continue to come back.

Times of Your Life said...

very very nice trade...

Anonymous said...

Excellent post. Thanks, X.


Kristen said...

Nice information. Thank you. Love your blog.

bl said...

Thanks so much for your blogg and the continuous refinment of the process. Here is my gap method using Scottrade with no scan and having a Master WL of 1600:
-click most %up/dn >$10 w most volume from Master WL to Open WL
-delete some of the high price stocks to make it a manageable WL of, say 12-20 WL
-delete Master WL(but always saved)
-decide on most % up or most %dn part of Open WL to focus on
-chart up 7-2 min charts per page by 2 minutes into the open plus the WL to scroll thru the other stocks which allows me to compare and contrast the best stocks on one or two pages
-chart watch for long set ups: slight pull back, or short it if selling off
-or short set ups: slight rally and short after short covering is "done" or long the short cover rally.
some Monday stocks(16): joe motr sgi adtn wy qcor ccme.
Thanks again. Comments welcome.

bl said...

As a Scottrade follow up I did the following for Tues:
-clicked most points UP from Master WL of 1600 with >900k adv to Open WL(20 charts)
-chart up top 7 charts plus Open WL on one page 5(or 2) min periods
-delete the 7 from the WL and scroll thru the remaider if necessary
-compare and contrast for long
-slight pullbacks seems to work well: cl mcd shaw sndk