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Friday, May 27, 2011

Friday's action

There was some talk in comments about BRCM as a setup and trade. Several people took it and were stopped out. If you look at the pullback from the high, it is not what I would classify as textbook or orderly. Price bounced around the retracement zone with narrow-range bars, most of them with upper and lower tails (doji, represents indecision), with no real sign of strength after the 3rd bar which was weak/red and had a real body that offset the 2nd bar. For comparison purposes, look at the pullbacks in MCP and MTL...if you study all three, I think the differences will stand out.

I don't have time to post the charts, but will do so over the weekend. All are 5-minute, with the Fibonacci lines plotted over the opening range low to high.



MS said...


For mcp, if the 8th and 9th candle did not offset the body of the 7th red bar then would it have been a trade you would pass on?


steve said...


Great eye opening post. I for one never really thought much about "the quality of the pullback" and for the most part just waited for a stock to pullback to the retracement zone and then start looking for hammers, offsetting bars, etc. If you could also start incorporating what to watch for in a pullback in a good setup vs bad one I think that would be a great help to many of your readers myself included.

Thanks for all that you do already,

Steve L.

Jay said...

I also took the BRCM trade on Friday. Friday was my worst day ever. I normally take 0 or 1 trades in a day. But I took 5 on Friday and all were losing trades and were not even good setups. I guess that is an example of "chasing success".

Here is my analysis of the differences between BRCM and MCP,MTL:

MTL pullback bars were hammer like bars with very short upper wicks. Their lower wicks tested the bottom of the RZ but price always closed in the upper part of the RZ. The 8 MA was always rising and not too far away (but not close either). The 5th bar was a near perfect hammer. Entry was a break of the 5th bar high.

MCP pullback bars were also hammer like with short upper wicks, relative to the lower wicks. Price pulled back near to the 50% RZ. Worrisome is that the 7th bar closed below the 8 MA, but then the 8 MA supported the 8th bar. The 8th bar is an inverted hammer reversal pattern. Enter on a break of the 8th bar high.



bl said...

Best of the 3: 5/5" 3/10" 2/15".
Question: do higher priced stocks say >$50 work better with 10 15 30 min charts than 2 or 5?

Larry said...

Hey X,

I also would like it if you could possibly start adding a little more analysis in regards to quality of a pullback into your chart posts.Maybe even a post or two specifically on this topic. I know entries like a hammer that closes green above the 50% fib line is a possible good entry but what my difficulties lie in is what to watch out for in the prior candles that I should see as red flags and pass on the trade.


Klaorman said...

Steve, I’ve been doing the exact same thing, so today I tried to be extra careful to make sure that the setups I took were good. Unfortunately, I still wasn’t careful enough.

5/31 trades

NUS 2nd 10m bar. The first bar was wide range, and the 2nd bar, though red, was very narrow. However, I didn’t see that it was near daily resistance and was also at R2. It stopped out on the 5th bar. It later came back, based a little at the OR highs, and then hit the FE exactly (fibs drawn from Friday’s lows to today’s OR highs). I didn’t see this, though. I also didn’t see that the lows after the stop were around the 38 fib, R1, and Friday’s highs! That would’ve been a very nice trade.

YONG 6th 15m bar. This stock had a huge gap. It kept going at first but then started drifting down. The setup bar was hammer-like, above the rising 5ema, and had bounced from the 38 fib drawn from Friday’s lows to today’s OR highs. My eyes grew wide and I jumped in! However, because of the big gap, there wasn’t much energy left. It did well off the entry, but then it stalled at around the midway point between the high and low. I partialed around there and the rest were stopped after a bar closed under the 5ema and that bar’s low triggered. It was still a nice entry, I think.

DOLE 9th 10m bar. I didn’t really like the upper tails on the first two bars, but the setup bar was a hammer at the 5ema and the pullback never got to the 38 fib. I tried it, but the first bar was apparently too wide; I got stopped out.

JASO’s 4th 5m bar was hammer-like, though red. I probably would’ve taken it before today, but the 3rd bar was a shooting star, so I passed. It did make it to the OR high before falling, but that was only .08 above the high of the setup bar.

jvs said...

I have just started reading this blog and while i have learned a lot, i still have lots of questions.

In the last five trading days i have taken around 6 of what i feel are X type setups, with a good results. but im not too sure if im actually trading like you guys do, or if i'm just getting lucky.

So if i may, i would appreciate everyones feedback on two of the trades i made. for example i would like to know if these are actually x-setups, what the setup name is, what whe dangerous existed in the setup, how do you use ma, and which ma's to use and why,etc. . .

Im using 10m, 100ma, 8ma, pivot points...

KT (may31, 2011) - I shorted KT when the eight bar broke the low of the seventh bar 18.98. I think this looks like a 'perfect pullback' type trade. I liked how: 1. wide open range 2. price couldn't break above the 8ma 3. price after first 30m, couldn't close above the RZ 4. bar 6 and 7 are very narrow. I put limit orders to cover at ORL and 161.8 fib extension lines. my stop was .02 above entry bar high. what do you all think about this trade?

CDE -(may27, 2011) i went long on the break of the fourth bar's high. i liked this trade because: 1. stayed above 8ma, 2. couldn't close below RZ. 3.hammer like bar formed when price touched 50%fib. I placed my stop a few cents blow the wick of the hammer like bar, and i placed limit orders to get out at ORH and 161.8 fib ext.

So far,once i'm in the trade i just set my stop and price targets, and forget it. however, i noticed that x sometimes will get out earlier, or move stops up. how and why? how do most people who read this blog manage thier positions? Do you use trailing stops? Is it a close below the ma?
For example in the CDE trade, when price reached the ORH, do you move the stop of the second part of the position to breakeven or do move the stop to just below the ORH? I hope these questions make sense, and i look forward to your feedback. thx

Doug R. said...

I traded AAPL on Tue with my Fib lines drawn from the opening range high to the previous day's swing low put in around 3:00EST. This was a 15-minute timeframe. I entered on a break of the 1:45EST bar. Why? Price broke through the opening range high and had solid support from the 5EMA. I rode it to the Fib extension.