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Thursday, April 14, 2011

Adjusting your targets

Someone asked a question in comments a few weeks ago - what do you do if you have a great setup but, in plotting your Fibonacci lines over the range (in his question, he was plotting Fibonacci lines over the morning's range on a 5-minute chart), the profit potential is not that great because the range is not that big?

In general, I would say find a better setup. Movement equals opportunity, so you want to enter a setup that has nice movement prior to your entry. However, now and then you see a setup like the one the commenter referenced, and it is hard to pass up. Wednesday I traded AG - it gapped up, but was a smaller gap than I usually have on my radar. However, the first four bars presented a compelling setup: price rose, showed strength, made an orderly pullback, and gave a nice signal with a strong candle that rallied off support from a rising 5EMA and the retracement zone (RZ). I entered on a break of the fourth bar's high.

I watched price action closely as it approached the Fibonacci extension (FE), and noticed a bullish narrow-range consolidation, so I adjusted my Fibonacci lines from the morning's range and plotted them from the previous day's low to the opening range high. This provided more profit potential (just under 4%), and the target was hit a few bars later.

Those of you who plot standard pivot lines will note that price actually rallied to R2 and then reversed for the day.



Ronnie said...

Thank you Trader-X, I have passed up many a setup for that exact reason. I will experiment with moving targets around.

Wednesday I had two good trades - CLF, which was a u-turn setup. Entry on a break of the 11th bar (Fibs over morning range, standard MAs), exit at the FE. And WLL which was similar to your AG trade.

Thank you for the blog, it is a true resource.

Flowtastical said...

Nice analysis TraderX,

Sometimes I scratch my head based on the lack of a good gap but I have learned to just pass up bad setups.

Stock selection is KEY!

Anonymous said...

Every setup I traded or thought about trading today had a wide spread on the bid/ask. And, they were decent volume. Not sure why...anyone else?


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Grove Under said...

I don't think this is a standard Trader-X setup, but it was based on a lot of the "tells" that I have learned from this blog.

MDRX - Success

On Thursday, 4/14/2011, went long MDRX on the break of the 14:35 trigger bar. This break coincided with the $21 resistance level.

DETAILS - 5 min chart, fib lines drawn on today's 15 min opening range, standard Trader-X MAs

RATIONALE - Gap up open with a wide green opening bar, but very long upper tail, so it wasn't a good candidate for the opening gap "quick hit" setup. The $21 level was tested and held as resistance throughout the day. Around 14:30, prices approached and found resistance at $21 again. However, this time the bars became progressively more narrow, were green (some were hammer like), and supported by a rising 5 ma.

CONCERNS - If the price broke above $21, then it would also need to break the opening range resistance $0.08 higher. I observed but didn't participate in a fakeout breakout earlier (see KO around 12:05 on the break of $68...ugh, still hurts to see as an observer) and didn't want to be another casualty. I was going to watch the price action carefully and eject if the price didn't break the opening range high with conviction.

TARGET - The fib extension. Missed it by just a few cents. However, I exited a bit early at 15:00 when price broke below the prior 5 min bar low (still had a trigger finger). In hindsight, I had a much better opportunity to get out on a break below the narrow hammer at 15:30 (right near the high of the day).


Grove Under said...

Great point about waiting for the right setup. But on those days when good setups are slim pickin', learning not to jump on trades with subpar setup or limited potential will be a big challenge to overcome. However, I realize that developing this discipline is key to long term success.

I noticed a couple stocks with interesting setups that had some larger spreads and passed on them. But the trades I took today seemed to have normal spreads.

bl said...

SVU was an earnings stock that rallied from flat pre mkt w/vol. I entered to early around the open for a scalp with alot of it's fuel already spent, but looking at the 5/10/15/30 min charts with ema's on 1 page looked like a b/o around 10:30 and again around 12. No pos but helpful to a view a stock that confirms in diff periods

ElToro said...

Yeah BL, SVU was a good setup, basic wedge pattern on the 5, 10 and 15 min charts that broke out around 10:45 E. It was a big gap for a $9 stock so it took some time for it to go. I bought the 16th bar risking 15c.

Anonymous said...

Hello Trader X. I am trying to find sources for finding gaps in the pre-market. I see that you say you find them, among other places, at prophet.net. I contacted them to see if they had a way for me to find pre-market gappers,and Steve Thompson, technical support engineer, said, "We do not have a scanner type software". Am I contacting the right place? Thanks
Any comments from anyone would be appreciated on where to find gappers before the bell rings.

Times of Your Life said...

prophet.net is closed for business like a year ago...

you can actually use pay scanner or you can just do some hard work (save money XDDD) and go to sites or your broker to scan for volume and gap and than sort them out as fast as you can

Anonymous said...

Scanning for gaps - if you have CNBC, just watch the pre-market ticker for 30 minutes before the open. You will get the bulk of them. They usually have a segment or two on stocks that are gapping as well.


Doug R. said...

Thanks X. I am on day 3 of the meditationshift program, and I like it so far. As you said, simple yet difficult at the same time.

Flowtastical said...

On the topic of scanners I use equityfeed.com

It's expensive but its real time sorting.