Here is something a little different. This was a gap down, but it rallied to take out the opening range high (ORH). When I see this, I keep an eye out for a pullback from the new trend (new trend is up, whereas the initial trend was down (gap down, decline)). At 10:10 the new high was made, and the pullback started. It fell through the retracement zone (rz), but quickly rallied and moved back above it. There was a nice pattern with support from the rising 5EMA, and I entered on a break of the 11:25 bar. My target was the Fibonacci extension (which corresponded nicely with the $26 level and a declining 100EMA), and it was hit three bars later.
Price chopped around at that resistance and then presented an opportunity for a "beyond the Fibonacci extension" setup. I didn't take it, as it was lower probability moving into the previous day's range (it worked nicely, though).
_______________
23 comments:
@.@ excellent trade Tom
Cool - I don't really do contra trades like that. I need to research this setup. Thanks!
Tom,
Do you look at each individual bars, or as a collective whole picture when deciding to take an entry?
Sometimes I lose focus and I take trades that in hindsight I wouldn't have if I changed my perspective.
Tom,
Thanks for showing us this type of exceptional trade. I have a question. Do you look at volume and/ level 2? Do u know if X does that as well?
i noticed this GME end of day.on the 15, i think it set up great for your beyond the fib trade. opening bar was hammer, pulls back around 11, breaks to new high around noon, so uptrend is established. pull back to the 20, narrow range green bar, lets get some!!!
http://i.imgur.com/RZTjh.jpg
Tom C.:
Nice trade in GME, I also happen to go along for the same ride. Only difference is that I drew the Fib lines from the prior day high to the current OR low. And the 61.8% retracement level of the RZ lined up just below the $26 level.
Another interesting observation is that the S2 pivot level was at around $26.13. This ended up being the upper resistance of the channel between noon and 13:00. The "beyond the FE" trade you mentioned eventually broke out of that channel.
***
PETM - bought on a breakout above the 2nd bar, 5m chart. Fibs were calculated on the prior day close to the current open.
Saw the opportunity for a "quick hit" setup, since the 2nd bar closed with a hammer-like pattern, and also filled in the upper wick of the 1st bar.
My stop market order was for $45.21, and my fill was $45.37. Ouch! My fill was right on the FE, so I had no more cushion and decided to eject quickly. Luckily, the momentum was with me and I got out a nickel higher.
Per Newtons Law, it eventually went up $0.50 higher from my exit, and missed the 1.618 Fib extension by just $0.02.
***
TBT - sold on a breakout below the 10:55 bar, 5 min chart. Fibs drown from prior day low to current OR high.
Based on a descending triangle pattern running into a declining 20ma, I sold on a break below support at $34.34.
Target was the FE, however, I should have been aware that the prior day's high (and close) was not very far below.
I let this ride, and due to bad trade management, I got stopped out with a loss. At best, it was in the money 2.7R, so I should have closed out the trade when it closed above the 20 ma, or Fib level, or breakeven at worse.
***
RENN - bought on a breakout above the 13:50 bar, 5 min chart. Fibs drawn from prior low to current OR high.
The ascending triangle pattern caught my eye, and once the trade was triggered, my target was the 1.618 Fib extension.
This time, my slippage was only a couple cents since I used a stop limit order. I was fortunate to even get a fill based on how fast it moved.
The 1.618 FE target was quickly reached on the entry bar, but I stumbled on my order entry. At least I caught half the move before it came crashing down.
***
Lots of "one of those days" stumbles today, and I left a lot on the table as well as taking some ill advised (i.e. WTF did I do that?!?) type trades.
Even with all that, I am grateful that I ended the day profitable and am getting better at sorting through the all-important and critical watch list, as well as seeing certain patterns develop. Still working on getting my basic fundamentals solid (no fat finger order entries!) so that I can take things to the next level.
Thanks to all for the great comments recently.
Noobie,
Sorry, man, I didn't realize you had left me a comment a few posts back. I just happened to go back today and catch your question. Ideally, I like the pivot/pullback to close below (for shorts, in this example) the 38.2% Fib line and no higher. When this converges with a 5ema or 8ema, it often sets up a good run.
I learned this from looking at countless examples posted here on the blog by Trader X, Tom C, and many others. I also look at about 100+ charts per day from the scans I run, and I find this pattern works consistently.
Check out HOT, 15m, break above 7th bar from today (5/19/11). I spotted it at the open and failed to continue watching it when I got blown outta two other trades and was rattled.
The pullback candle's body is above that 38.2% Fib line (going long in this example), and it just rockets straight up from there. (I actually experimented with the Fibs and drew them over the first hour's range instead of the first 30 minutes, but it works either way in this example.)
Wish I would have continued to watch this one, as I highlighted it on my list almost immediately after I ran my scan. Next time. :D
Joshua,
I really like Finviz. It is a wonderful screener, and I like that it allows you to work with so many detailed variables for free. I used it for quite a while, but I found that having to then transfer all of my candidates, one by one, to my software watchlist became tedious, and the data was delayed by 15 to 20 minutes without a subscription.
For the last few months, I've used thinkorswim's desktop software scan which is free when an account is opened.
The upside: You can set up a real-time screen for virtually any and as many variables as you wish. And I mean ANYTHING.
The downside: Beyond very basic parameters, you have to know how to write "script" or "code" to set up the things that you want. Or you can e-mail their tech team, and they will help you set things up. I don't know how to write code. My initial reaction was, "I'm a day trader, and I don't want to start a second career or have to learn an entirely new skill set just to run a scan".
However, it's really not so bad for the few things I instruct it to scan for. But I wish it was as simple as one click, like it is with Finviz. I did have to put in some time to figure out how to get things set up the way I wanted. Some things I still haven't figured out, and I often think that they should add variables like average volume to their drop-down menu by default.
I am often tempted to use Trade Ideas, but I'm on a Mac and use thinkorswim, both of which may not be compatible. And I don't know if Trade Ideas would instantly populate my broker's chart screen with whatever candidate I click on in Trade Ideas. The web-based version seems great from what I've seen though. Any feedback about Trade Ideas is much appreciated.
Chips,
I have not been able to link trade ideas to my lightspeed charts, but actually that is okay with me. i use the trade ideas to feed quotetracker, and i have each scan feeding a different portfolio window so it is very organized. so right now i have 5 portfolio windows, (1) up most on day (2) down most on day (3) gapping up over 1%, avg vol 500K, relative volume 1.5, avg true range $1 (4) gapping down with inverse of all the gap up ideas (5) basic watch list.
so, i then sort the quotetracker portfolio windows by vol% on the day (something i learned from hcpg blog) and try to look at the stocks that are over 100% of their daily trading volume. so basically, i am looking at the most active gappers as opposed to gappers that are up the most. i could sort that way as well (up the most, down the most) which i do from time to time.
if you want more info let me know. it took me forever to get a nice scanning software going. i think i got it down pretty well now, just need to figure out the trading, lol!
here is a pic of the layout
http://i.imgur.com/9s3fi.jpg
so i have four screens. i think X trades from a laptop so he may laugh at me. on the left, the 8 gray charts are on a wall mounted screen above the middle of the image. the are on ninja trader software so i can stack the 5 over the 10 over the 15. it is pretty sweet when you can see how all the time frames line up. like here (old chart):
http://i.imgur.com/n40Nk.jpg
the 3 black charts with the level 2 beneath them are on my left hand screen plus the two h/l scrollers. the middle screen has some charts of the q's and spy, 2 momo scanners, a ninja trader chart, and then the 5 portfolio windows highlighted in yellow. the right hand screen has three quotetracker charts and some other random screeners.
i actually like having the different chart software because a chart may look "nice" in one software and look "violent" in another.
maybe madscan would work with mac. as well as there is something called spiderscan which i bought but don't use anymore.
Chips and Salsa, I use the free Trade-Ideas app on my PC; it can send the stock you click on to your trading platform. After running Trade-Ideas, the first time you click on a stock, a window pops up with a crosshairs icon on it. Drag the crosshairs to the window where you would type a symbol to establish the connection. You have to do this every time you run the app, though.
Klaorman,
As far as the bar competion method, that is for a trade that is already in my favor. It is so I don't get jumpy and get out to soon. I have a stop in place on every trade. If the stop gets hit, it gets hit, regardless of if the bar completes or not. I was talking more about once the trade has already gone in your favor and you are monitoring it for the exit. Hope that helps.
Grove,
That PETM was a clean setup. I took almost the whole move out of it. Try to set better stops rather than getting out right away.
t-money, thanks for the clarification; that makes sense.
joshua, I can link Trade-Ideas with my Lightspeed charts; I just drag the crosshairs over a Level II window (and my charts are set to Link To Focus).
5/20 trades
ARUN 3rd 5m bar short. The bar had an upper tail, and despite the large green body, it closed under the 38 fib. After I shorted under the bar, it quickly dropped down near the OR low, but then just as quickly it bounced. I rued the fact that I didn't take profits on the quick drop and then had to take a tiny profit as it kept bouncing. It never got close to my stop over the setup bar, and in fact it never breached the whole number 30, where I had been thinking about updating my stop. But it did go past my b/e point by .07, and I would have sweated that after seeing a .30 profit. It soon hit the FE and beyond, and then at 10:10 it had an even better-looking 5m bar for a very nice "beyond the FE" setup. But like the other day, I had already had other losses and couldn't pull the trigger. Again, I have to keep the faith and BELIEVE in my setups.
GILD 6th 5m bar. This green bar with an upper tail was centered around the 38 fib and I thought the whole number 41 b/o would be nice. However, I anticipated the breakout, buying at 41, because I was afraid the breakout would go too fast, which I sometimes see. I got stopped, but then to double the pain, I did it again, buying at 41 because it "looked good" on Level 2. Sometimes anticipation works, but sometimes it doesn't.
OPXT 11th 5m bar (10:20). This red hammer closed at the 38 fib and the 5ema. I got in, withstood the wiggles, sold 1/3 at the OR high, watched it hit 2.69, within .03 of the FE, and sold the rest at 2.67. It later hit the FE exactly and reversed, but I would've had to wait an hour and a half and endure a trip back under the OR high for .03 more.
AKAM 7th 5m bar. This bar was almost a doji and above the 38 fib and 5ema. I took the trade, but it failed.
I missed seeing CRM's 11th 5m bar above the 38 fib (in fact, the price never retraced below that fib). It almost hit the OR high.
klaorman,
thanks for letting me know. i am going to have to try that on monday (linking trade ideas to lightspeed). i don't know if it helps you, but maybe you can add filters to the madscan like a relative volume ratio, or stocks that have at least a certain average true range, just to limit the stocks you see.
i had to do that with trade ideas, and it limits your ideas but i don't wind up with 100's of stocks. also, sorting the stocks by vol% in quotetracker helps as well.
Flowtastical:
I hear you about possibly sticking with the trade after even a bad fill. In this case, my risk/reward went totally out of whack, and I didn't have a fall back plan for a new stop. Something I need to think about.
On your PETM 5/19 trade, did you enter on a stop market order at $45.21, or you get in a couple cents lower based on a 2 min chart?
I took a look at the time and sales thinking I got robbed. But about a second after the price hit $45.21, the bid ask just blew up.
Klaorman,
ARUN was a perfect example of what I was talking about on completion of bars. I also took the ARUN trade below the 3rd bar low on the 5 minute chart. I watched every bar on the 5 minute chart to completion waiting for a CLOSE above the 5ema as a warning sign to get out, with a target of 100% extension at around $27.85. This never happened and I closed out around $2 profit at the 100% extension.
Granted, this is how i trade and is not for everyone, but I have found that when a bar of the timeframe that I am trading closes above the 5ema, that usually signifies the end of the move if it hasn't hit my target yet, and it may be time to take profits. Or at least analyze what is going on in the trade a little further.
MORE CONTRA TRADES
I've had pretty good success seeing these contra setups that catch moves against the opening gap (i.e. buying on a gap down day). A key indicator I use is the VWAP, which I describe further in a separate comment, due to space limitations.
Yesterday, Tom C. posted about GME, and there were a couple other similar contra trades today (5/20).
HGSI
http://imgur.com/ev77b.png
1ST TRADE (did not take) - buy on a breakout above the 12:40 bar on 5 min chart. Fibs drawn from prior high to OR low.
After hitting the low of the day which was also the 1.618 extension, the price rose back above the FE, and was supported by a rising 5 ma while creating a 3 bar failed trade reversal pattern:
1) Doji appears to establish a swing high (12:30)
2) Red bar broke below prior low (shorts getting in)
3) Green bar broke above prior high (shorts getting out)
A key point to note even before the trigger setup, the swing high (at 11:30) prior to the low (at 12:00) was taken out (at 12:20). This indicates that the trend may have changed.
2ND TRADE - I bought on a breakout above the 13:10 bar on a 5 min chart.
This was somewhat similar to the GME trade yesterday, where price consolidated over a 3+ bar range.
Although the trigger bar was red, I was comfortable entering due the the rising 5ma as well as trading above the VWAP (dark blue line).
I exited at the S1 pivot level when price started to stall.
***
CYD - Did not trade
Buy breakout above the 10:50 bar on a 5 min chart. Fibs drawn over prior day high to OR low.
http://imgur.com/t9hbB.png
After a gap down open, slight consolidation, and a sharp break, the price bottomed and bounced sharply. It then broke above the 5 ma as well as the VWAP (dark blue line), and consolidated just below the OR low. The rising 5 ma helped to "push" the price to break out higher.
Target would have been the 38% retracement. In addition, if Fibs were drawn over the current OR, then the 1.618 extension nearly overlapped with the 38% retracement shown on the chart.
RANDOM TIP - Using VWAP with Trader-X Setups
VWAP (Volume Weighted Average Price). Probably best to Google this for the best explanation, but it's essentially the average stock price weighted by volume for the day. It's been used by institutions for a while, primarily for determining how well they're executing their orders in addition to various trading strategies and who knows what else.
This value appears as a line on a chart, similar to a moving average. For TradeStation, the indicator is easily available from their website. Not sure regarding availability on other platforms.
VWAP is not perfect, and it's not the holy grail. But at times, it appears magical like the Fibonacci levels. And like the Fibs levels, you must use it in addition to other criteria for trade setup.
Some tips:
* Catching contra moves - if the stock gaps hard, but crosses back over the VWAP, then there's a chance it might turn into a reversal type day, or at least give you better odds for a contra trade. After a crossover of the VWAP, look for solid setups against the gap (see my other comment "MORE CONTRA TRADES").
http://imgur.com/ev77b.png
http://imgur.com/t9hbB.png
* Not impacted by chart interval - a great feature of VWAP is that unlike a moving average, it doesn't matter what time interval you chart, the line value remains constant. For example, if you switch from a 1 minute and go to a 15 or 60 minute chart, the line will remain the same relative to price action.
* Use as another support/resistance - like the Fib levels, moving averages, and pivot points, the VWAP becomes yet another potential factor to consider.
* Trade direction filter - if price is below the VWAP, then consider only shorts, and vice versa. There are some "Trader-X classic" 15 minute setups such as the "bread and butter" that started to achieve lower success rates. This might be a good filter to possibly move odds in your favor.
I'm sure there are folks out there using this simple indicator in much more sophisticated ways. But thought I'd share what I know since it seems to work so well with the Trader-X type setups. I'll post more examples in the future.
If you do find some value or already use it, it would be great if you could share what you have learned!
Grove,
That is a great analysis. You are 100% correct. If your risk/reward is out of whack. Get the F out!
I look at the 2min and the 5min. I bought some at the 2min and bought more on the 5min.
When the setup is compelling enough I look down 1 timeframe and see if I can pick any up on a hammer or inside bar.
I don't use fibonacci extensions as my exits so we trade a little different. I just try to sell into wide range bars. So I sold half into the move and sold rest when it stopped going.
Noobie,
I feel like I didn't answer your question with enough clarity after reading it again.
I don't actively look for every single candle leading up to my entry to be above/below the 38.2% Fib line (long/short). I really only require that my trigger candle, ideally a pivot/pullback candle, close above/below the 38.2% Fib line (long/short).
The fact that every single candle closed below the 38.2% Fib line on JDSU, MU, and NYX was great, but it's not something I actively look for or require in my parameters.
Maybe I should start paying closer attention to this type of set-up and see if it yields better results! Thanks for pointing that out to me, as I really didn't notice it until you said something! :D
joshua,
I had a couple of simple filters, but I'll add a few more; thanks.
t-money,
Very nice job on ARUN. My goal on most trades (before I started looking for Trader-X trades) is to trail stops on the other side of the 5ema 5m by about .05 to .10 and just let them run as far as they can. However, when a stock moves fast and gets far away from the ema, I get nervous and look to close a trade early, especially near support/resistance. Then if the stock goes farther (sometimes much farther), I regret it. The low of ARUN's 10:05 bar was about $1 away from the 5ema, and the 10:10 bar actually touched it. How did you handle the "wild" (to me) swings? Did you partial along the way? My target would've been the FE, so once it hit it and kept going to the 62% extension, I would've definitely been out somewhere in there, and especially after it bounced quickly back to the FE and beyond, thinking that it was done. How did you choose the 100% extension as your target?
Klaorman,
As I said, I don't really watch a stock once I am in it until after the 5 min bar has formed. So I didn't notice any swings happening while each bar was forming. When I checked each bar after they formed, none had closed above the 5ema, so I had no reason to get out as far as the way that I trade.
I always use the 100% Fib extension as my target, but if a bar closes on the other side of the 5ema, I put my stop above or below the high/low of the bar that formed.
5/23 trades
Or non-trades, since I was very tired today and missed every setup.
KKD 10:15 5m bar. This .04 wide bar was above the 38 fib and rested on the 5ema. Price easily hit the FE, then pulled back to the OR high exactly while making a cup and handle/ascending triangle, breaking out later to hit the 62 extension. t-money, along the way I noticed that 3 bars broke the 5ema, but each time they closed above it until the FE resistance was too strong. I recall many times that when I used .05 (or even .10) under the 5ema for a stop that I would get hit and then the stock would just reverse and keep going, so I will try to apply your method going forward; thanks!
SPPI 10:35 to 10:55 5m bars. This wasn't a gapper, but it made a strong move up in the morning and then printed 4 tiny bars along the 5ema before breaking out to almost hit the FE. It then bounced off the spike highs and then went beyond the FE.
CTFO spiked on some news later in the day and then pulled back, never dropping below the 38 fib. The 14:30 red 5m bar was the setup; price smoothly went beyond the 62 fib extension.
CHRS also spiked on news, then produced a red hammer at the 38 fib, its tail touching the 5ema 5m. Price hit the 50 fib extension, but then it drifted down the rest of the day.
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