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Wednesday, March 02, 2011

BGS - 030211

BGS is a classic setup that happens multiple times a week. I have posted charts of this particular setup for years, and it still works flawlessly and has a substantial success rate (well north of 80% when combined with the other factors I consider in taking a trade). I've said it before - if you pick one setup and focus on it, and don't allow yourself to overtrade or get suckered into trading subpar setups, you can be highly successful.

BGS gapped up, topped out, and made an orderly pullback that didn't close below the 50% mark of the morning's range. The 4th and 5th bars were "offsetting bars" as I like to call them, and the 5th bar was strong, had support from a rising 5EMA, and closed at its high (not to mention it was a narrow range bar, for those of you that follow that kind of thing). I entered on a break of the 5th bar's high, and exited at $17.00 (just above the Fibonacci extension (FE)). The target was hit in under 30 minutes, and the total profit was almost 4%.

Also, I am still experimenting with chart colors to find out what works best. Many of you didn't like the previous colors, so now I am trying these. Both the 5 and 8EMA are the same color (blue) because I really don't care which is which. The 100EMA is black, and my Fibonacci lines are white. Let me know if this is easier to read.



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21 comments:

jack said...

I tried to search the site for definition of "offsetting bar" but couldn't find it. Please explain. Thank you.

Michael said...

Jack, type offsetting bars into the search box in the upper left corner. You'll get pages of examples.

Times of Your Life said...

@.@ very very excellent trade...

leon t said...

x, another way of looking at this which i learned from another trader whose name i'll only mention if allowed. "this is a bull flag, the pole is the first bar above the gap. now if the vehicle is bullish. the flag will go above the flag pole within 4 to 6 bars of the formation. if not it will then form an abc formation." in your example the market broke within the 4 to 6 bar rule.your target was the quickest and the fastest. since in reality there are no certainties only possibilities. great trade.

Tomross58 said...

Hello X, I just found your blog about 2 weeks ago and after randomly reading your posts, I have decided to start at the begining. Lots to read and so many charts that my eyes/mind are starting to get accustomed to the patterns.Repetition is very important.I have been day trading for 1 1/2 yrs and break even mostly. I really am learning alot and would just like to let you know that. I hope you continue and once I am caught up I would like to contribute to the posts.Thank you

Tom

Juan M. said...

OK, I have my mandate. Three setups only. Focus, focus, focus. Thank you Trader-X.

Trader-X said...

leon t, nice comments. We say similar things, I just use the terminology "topped out", orderly pullback, long tail, getting caught in the tail, etc. But you can map them to the pole concept, and does the flag break the pole's range (and in my case) make an orderly pullback...in which case you may have a runner once the rally resumes. Or does it stay in that first bar's range (the pole in your description, pull back, and then have a more limited rally (ABC setup in your description).

Thank you for giving readers another way to look at it.

Trader-X said...

tomrose - thanks! juan, that is a plan - go execute!!!

James said...

Jack, offsetting bars = when you have a red bar followed by a green bar, and the ranges are almost the same. The red bar opens near the high, and closes near the low. The green bar follows it and opens near the low, and closes near the high. It is a good sign of a reversal. BGS isn't a perfect example, just a variation worth noting.

Dominick said...

Hello X, just a quick question. Do you always consider the mornings range the first 15 min.?
Thanks

Trader-X said...

Dominick, I don't always plot my Fibonacci lines over the first 15-minutes (or, more accurately, over the morning's swing high and low which usually happens in the first 15-30 minutes), but I do usually keep an eye on that level and factor it into my decision making (sometimes it factors more, sometimes less...it depends on how everything else lines up).

Chips and Salsa said...

Trader X,

To Dominick's point, I read Tom C's post (06/22/09) about how he plots the ORH and noted that the day's first pivot usually (but not always) occurs 30 minutes after the open for 10 and 15 minute charts. Sometimes the pivot can be earlier, depending on the chart and time-frame.

But what if the first pivot on a 10 or 15 minute chart occurs 40 to 60 minutes into the trading day before a pause (inside bar) or pullback (down bar) occurs?

Is this type of chart discarded as a candidate or do you go ahead and plot the first pivot, no matter the time from the open?

Granted, if the stock were to just rip and rip and rip and never have any type of pause or pullback, it would seem risky to jump in after a huge run.

But take AMTD from today (3/3/11), for example, 15 minute chart. It gapped up, ran like crazy, and didn't offer a pause until 10:45 EST.

Would you plot the ORH at the 6th 15 minute bar's high? Or would you scale down to a faster time-frame to deal with these types of oddities? Or would you suggest simply plotting the first 15 minute bar as the ORH, regardless of subsequent bars, as sometimes was done on much older blog posts from '05-'06?

Times of Your Life said...

for C&S's AMTD, 15 min...

ah i am not answering the question but cuz C&S mentioned this chart, i want to see if what i see is similar to what other Traders see...

what do you guys think if the entry is actually the 9th bar of the 15 min?

if you plot the Fibonacci for the first 30 min of the 15 min chart, will get the FE entry...

maybe it is good entry because the stock run up all morning and to near the high of the March 1 (passed through and get support)...
get support from the previous day high, and formed a green, somewhat solid green bar (but it is a bit undecided cuz with a bit of top and bottom tail)

however:
1. support by EMA 5
2. at the support of the FE and also support from the March 1 high (2X supports)
3. 6th bar is a hammer which confirm a bit bullish at that level once it hit that support

therefore, a higher chance you get a run up...

not sure how to plot the Fibonacci...
the 2nd bar is undecided bar with top tail and the first red bar, so plot in the first 30 min...
and usually the first 30 min of the market open is a good plotting range...
i guess, sometimes have to do some try and error and see what fit the chart...
cuz i think it is just a guideline to give you a reason, a very good reason to enter a trade with all the other factor meet and consider together...

what do you guys think?

Jack said...

So an offsetting bar is basically and inside or narrow range bar?

I searched for the term and the posts mainly show "what I call an offsetting bar". Nothing that really defines it outright.

Michael said...

Jack, someone gave a definition in the comments earlier. Check that out. If you look at the posts when you do a search, you will see plenty of charts to study.

Anonymous said...

question on time frames.

most times you are on 5min others 10 or 15min, and occasionally 2min.

do you take all singals on all time frames?

thanks
terrible trader

ZJ said...

Hi X

I wanted to submit a "beyond the FE" crude oil futures trade from today.

The price action of oil and its chart may benefit people who only see it end of day, hear the news stories or think its too high.

CL Apr 11 Futures
March 4, 2011
Fibs: ORH/ORL
Chart: 30 min

Oil gapped up above the PDH (compared to the previous regular session close) and after the morning range produced a large green bar above its ORH with a tail.

The next three bars were tight closes near where the green bar closed with each being slightly higher than the next. (Similar to push-through setup) Also each bar either tagged the 50% retracement or the ORH as support.

I entered long on the 5th bar high @ 103.75.

My plan was to exit above extension zone approximately $104+ (depending on how it reacted to the $ whole number) but my automatic target order was actually lower (I didn't realize it at the time) so got stopped out before $104. (With crude each penny is $10.)

A solid setup is the only way I know of to combat high prices at the pump!

Thx
ZJ

Times of Your Life said...

ya i think better to look at the definition in the search box and study all the charts

but a breif explanation is...
off setting bar is just like the name...
off set each other or cancel each other out

Gerald said...

terrible trader (change your name, even if you are!!! you are only reinforcing the negative!!!), in reading X's posts over the past few months, I think he only trades the 2 and 5-minute timeframes. In the past he has traded 30, 15, and 10. But he has written a lot about wanting to only trade the first few hours of the day, which is why I think he trades the 2 and 5 now.

Anonymous said...

Thanks ZJ, that was helpful to me.

Mike

Jack said...

Ok thanks for explanation. That's what I thought it was but needed to be clear.