Here are a few select charts and comments:
Howard said...
"I'm loving this site and the comments, I don't think I've ever learned so much. In my quest to be patient I waited until today to pull the trigger and traded MRO. 5-minute chart, bought it on a break of the 10:40 bar, sold at the fibonacci extension. I think this was a classic setup. Any feedback?
Thank you so much Trader-X and others who contribute."
Michael said...
"Hi Grove. I don't pay attention to the overall market direction. But, don't confuse that with not looking at the price action of the stock you are trading, and what it has been doing prior to you deciding to enter. That is what I learned from this site years ago. X used to go into a lot of detail about how he took fewer trades so he could really analyze each one, and I have found it is critical to know what is happening in the context of a trade you are about to make. There is a big difference between entering a pullback after a gap up and strong move, as opposed to entering a pullback after a move up following a weak open and weakness after the open (the later is has a lot of resistance it has to get through, no matter how nice the setup may look).
Generally speaking, I go long on strong issues and go short on weak issues (I am looking to buy on a good signal if a stock gaps up and is strong, and short on a good signal if the stock gaps down and is weak). I don't go contra much.
FLR is a good example today. I made almost $2 entering on a break of the 8th bar (5-minute)."
Terry said...
"FLR was a good trade Michael, I took that one too. I also took SAPE off a break of the 3rd bar. A bit riskier, but still a high probability and a very quick 2%+."
t-money said...
"Michael,
I also traded FLR after the 3rd bar (green hammer)on the 15 minute chart. The stock formed a hammer at the 50% retracement of the opening range. I bailed after it could not hold the ORH. I was curious as to where you exited this stock and why?"
Michael said...
"t-money, I exited on a break of the 24th bar's low (5-minute chart, time-wise that is the 11:25EST bar). Reason was it was a high tail print, and I figured price was going to fall back through the high of the morning** ($71.80 was that high mark). Had price found support at the high (as X says, resistance is now support), I would have seriously considered re-entering with a target of the fibonacci extension. It didn't, though.
**I was sketchy about an extended move past the high because the retrace was a little deeper than I like (to the 50% verses the 38.2%), there was a bit of an upper tail on that first bar, and the first bar's move was a little extended leading me to believe it may have run out of steam for a later move.
David said...
"Had a great trade in DPZ today. It gapped up and pulled back. The pullback was deep in the RZ, so I almost passed. But I kept it on my list and it rallied nicely. I entered on a break of the 11:50EST bar. Price had support from a rising 5EMA, and had rallied out of the RZ. Almost a 3% gain when it hit the FE, but the entry was later in the day than X trades. Do you guys trade this late, or would you have passed?
5-minute chart, by the way, on DPZ. Fibs over the first 3 bars low to high.
Hope that helps."
Anonymous said...
"Tue, May 3rd. GM. Classic X? Not a huge move, but I was able to take a nice sized position due to narrow range, tight spread, and heavy volume. Entry on a break of the 4th bar hammer.
Michael"
Narayan said...
"Michael I traded GM as well. Like minds! I love these because you can get in and out without much slippage.
Trader-X I hope your family gets better."
_______________
37 comments:
very nice comments....
about the NUAN,
its not good cuz like EIToro said...
and also, the price was quite stretch compare to other days...
ElToro (and all):
Under the previous Trader-X post, I saw your comment regarding the ROSE setup on 5/9, and how you thought the 7th bar on the 5 min chart looked too risky.
http://imgur.com/esqYS.png
What were the warning signs that prevented you from taking it? Hammer too wide range? Deep retracement into retracement zone (RZ)? Trigger bar still in RZ?
I wasn't around, but if I saw this setup, I might have taken the trade, putting a lot of weight on the hammer setup.
Appreciate the insights.
My frequent flyer miles aren't what they used to be. And neither is this tricky little stock.
5/5/11: DAL, 5min, 5EMA, Fibs over OR, entry above 5th bar, stopped out 3 bars later.
This set-up seemed perfect. And I can't really fault the previous day's range, as the entry/price action was in the clear. Sadly, the 10m and 15m charts would have worked.
Also note how after I was kicked out of the trade, the stock "takes off" (yuk-yuk) without me. :\
PS: MS, I commented on your NUAN chart on the previous posting. :]
Grove,
On ROSE it is more of a personal preference than anything. It wasnt that the bar was too risky from a setup perspective, at this time in my trading I dont like taking trades on bars with risk over .50. In the case of the 7th bar it would have been at least .75.
Hi everybody,
I was in ROSE and NUAN yesterday as well, using the 5 min charts, both were premature entries and would've been much improved on 10 min charts.
NUAN, entered above the 11th bar and got stopped out on the 14th.
ROSE, entered above 7th bar, stop set below 45.36. Price came with in 1 cent of getting stopped out. Exited much too early at 47.5
I am leaning towards using the 10 min for entries from now on. The down side may be missing fast movers, but it seems to be giving out less false signals. Have to leave the 5 min to the pros like Trader-X.
Hey Guys,
Here are a couple trades that I thought looked like good setups but would have been stopped out so wanted to get people's thoughts on what might have prevented you from taking these trades.
CE - 5min long off 13th bar
GSM - 5min long off 13th bar
PDEX - 5min long 6th bar
Thanks,
noobie_trader
The size of the opening range as a percentage of the stock's opening price:
5/10/11
GLBC, 5m, 5EMA, Fibs over OR, entry above 4th bar.
Here's what I was talking about in my comments to MS in the previous post about the significance of the width of the OR being between 1% and 4% of the stock's opening price.
Look at GLBC's OR. It's just under 2% of the stock's opening price. The potential is still left in the stock to really take off, and it does so mightily.
FE (OR is ~2%) and CROX (OR is ~3%) are other great examples. The smaller the initial opening range, the more potential I have found the stock has to rise, as opposed to a range of, say 10%.
Years ago when X posted 15-minute charts, the wide range bars were low probability setups because if you have a big move over the first 15 minutes (wide range green or red that has small to no tails), most likely the stock has made most of its move for the day in that 15 minutes. On the 5 minute charts, there is a little more latitude...generally speaking on the 5-minute charts I scrutinize wide range bars a lot more whereas I dismiss them in longer time frames.
To clarify and give credit where it is due, I definitely learned this wide vs. narrow opening range concept from all of you here, no doubt. Thank each of you out there who have contributed to my learning curve. :]
I mentioned that in my post to MS, and I didn't mean to suggest that this was knowledge I had acquired on my own. Sorry if it came across like I was stealing credit from X or anyone else. :]
What I'm hoping to accomplish with my comments now is to develop a measurable, quantifiable range that I personally can use repeatedly with success over the long term.
It seems that quite often, wide-range bars are described with subjective or interpretive criteria. And sometimes, they defy the odds and outperform anyway.
Granted, trading is both art and science. And experience has a lot to do with knowing when a wide bar is still acceptable or when a narrow bar is too narrow. But for me, I just want to share what seems to be recurring over and over on a daily basis, regarding narrow opening ranges between 1% and 4%.
It's kinda like the narrow range bars some seek to execute against to catch explosive moves. Contraction leading to expansion.
Trader Mike states that he prefers to execute against narrow-range bars that are 0.5% to 1% of the stock's current price, using the classic Dummy set-ups.
I'm applying a similar concept to the opening range to try and reduce risk and increase probabilities for success with something quantifiable, something I can actually measure.
Another explosive example of an opening range of ~2% of the stock's opening price:
5/10/11, SRZ, 5min, 5EMA, Fibs over OR, entry above 10th bar.
Hey Noobie,
For me, I like to see the first 5 min bar close above its 50% mark. CE, GSM, PDEX all closed below that level so I would have kicked them out of my list. I actually did that to CE and GSM today as I want to focus on the strongest. Take a look at FE, CROX and GLBC that Chips mentioned and I think you will see the difference on the opening bar. I didnt see GLBC but traded FE and CROX.
Chips and Salsa, I didn't mean to imply anything. I was letting new readers know they could go back a few years and find more discussion.
Thanks for the reply El Toro. So does that mean one of your own personal criteria when filtering out setups is to always throw out stocks that close below 50% of the first 5 min bar?
noobie
Noobie,
Yes that is correct. I want to get my list down to the strongest names as quick as I can so this is one rule that I came up with. Do I miss trades, sure, but for how I am currently trading it works for me.
El, that is a good idea. My screen is to elmiminate stocks that don't move in the direction of the gap on the first bar. Adding this to it will help get it down as well. Thanks.
Howard
Chips and Salsa:
Thanks for the explanation on a way to quantify when an opening range is ideal vs too big. I agree nothing is perfect, but this is a great start.
That's a great tip, along with ElToro's explanation of removing stocks from the watch list with a close below 50% on the first 5 min bar.
I also recall reading Trader Mike's criteria on what's considered a narrow range bar, and have never followed up on researching it. So this will also be something I'll have to start tracking.
QUESTION:
Looks like in some of your trade examples, you entered long trades on a red hammer setup. Based on what you've tracked, have you found the red hammer to be higher risk compared to a green hammer?
Thanks to all for the great comments.
Today (5/10) started off good with a nice trade in FE, where I bought above the high of the 5th bar on a 5 minute chart. The setup was clean, and it felt like it was going to be a great day.
But I now realize that if you get enough little paper cuts, you will bleed...a lot.
I really like breakouts above a whole number, but buying SREV above the 16th bar on a 5 min just didn't work and failed on the next bar. I missed the earlier 12th bar setup, but then thought a breakout above the whole number $17 level, which also lined up with the 16th bar, would be lower risk.
http://imgur.com/HWZgO.png
In hindsight, the $17 level wasn't really established as a firm resistance prior to my entry. And unfortunately, I didn't continue to follow this one and get back on board for the nice ride up.
http://imgur.com/lR54X.png
And here's yet another one of many others that didn't work.
VLO on a 15 minute chart. Bought above the high of the 6th bar. I thought the prior break below the $x.50 level (not as strong as whole number level) was a fakeout to clear the stops and move higher, but I was quickly proven wrong.
http://imgur.com/CW4lw.png
This wasn't necessarily a textbook looking setup, but seemed OK due to the gap open. Bars 4-5 with upper wicks (bearish) and expanding ranges may not have been a good sign. However, I took the higher risk and was not rewarded.
It was just one of those days where some element of luck was not on my side. After reviewing the trades this evening, there were definitely trades that I would not (and should not) take again. I'm much too embarrassed to show those. Those "little" losses, as minor as they seemed at the time, really added up.
But it was also reassuring that the majority of the setups I took were based on a sound basis. Yes, selectivity is key! I'm getting back on the wagon and will stay on board much longer.
As always, any comments appreciated.
James,
Cool, cool, I misunderstood and was worried I was maybe stepping on toes. I'm paranoid about my community etiquette, lol. Just wanted to make sure I wasn't sending the wrong vibe. I actually read your comment again and figured I was probably worrying over nothing. Sorry, bro. :D
Grove,
Happy Gilmore once said, "Gold jacket, green jacket, who gives a #%&$." That's pretty much my attitude towards the color of hammers. :D
Just kidding. I actually prefer to see green hammers for longs, and red hammers for shorts. But if the other X criteria are in place, I am fine taking a long on a red hammer. In my limited experience, the difference between green and red hammers is negligible IF the set-up's other factors are working in my favor.
Like X states, the context of the previous bars/price action must play a critical role in my decision-making. A single hammer in a vacuum, red or green, is not as important to me as the overall context.
Grove Under,
As you and X and many others here have stated, stock selection is definitely the key, if not THE holy grail. I find that if I was focusing on the right stock, the rest of the trading process tend to be a lot easier.
Personally I would've passed on the VLO trade as the gap was very small and the volume wasn't that unusual compared to its average volume. But I would've passed on Chips and Salsa's GLBC trade as well and that turned out to be a nice winner.
Grove,
I was in the same trade on FE. Where did you get out?
Stick to one timeframe until you are putting up strong numbers everyday.
FE trade could already give you blowout numbers depending how hard you hit it.
Also would like to note you spent probably less than 10% of your post talking about what you did right and the next 90% talking about what you did wrong.
Chips and Salsa:
Thanks for the explanation regarding red hammers. I've read some posts in the past where Tom C. will take red hammer buys, whereas Trader-X usually doesn't. All about the risk tolerance.
KIS:
You're so right, when tracking the "right" stock(s), all the setups appear effortless. Makes it so easy to execute.
I believe I'm still scrolling through my watch list too much. I'll need to continue to refine it, and/or get more comfortable with the current process.
Flowtastical:
I exited FE yesterday (5/10) right around the FE (11th bar/5 min), and got filled at $43.24.
I watched the price as it approached the FE, and since it sliced through the level quickly, I waited to sell, thinking it might escape gravity and go into space. However, once it started to come down quickly, I sold right above the FE.
You make a very good point that I need to focus more on my strengths! I believe my basics and fundamentals still need some work, but I'm getting more solid and will shift my focus to strengths. Thanks much for the reminder.
Hi everyone:
I traded IPSU today after the green inside bar on the 10 minute chart. I scaled down to the 5 minute chart and also saw the red hammer (4th bar) at the ORH right before the breakout. The trade shot up quick and then crashed back through the ORH when the market tanked at the same time. I was hoping on getting some feedback on whether or not this was a decent setup that got foiled by big market movement, or a bad setup all together. Thanks for the feedback.
Hey T-Money,
I was also watching IPSU but passed because there was bit more white space than I liked between the entry bar and the moving ave. If you look at the setup on the 10min bar its even more pronounced.
Since there is so much space between the entry bar and the moving ave there is a good chance the stock will try and fill that space which is exactly what the stock did.
Hope that helps,
MSia
Hey Tmoney,
Take a look at your moving averages in IPSU and the distance they are away from the candle when you took the 2nd 10 min bar. I use the 5ema and it looks like it is around 50 cents away. Too far for me. If using a 5ema look at the 5th and 7th 10 min bars. That is how I like to see the ema pushing the price so to speak...
T-Money... in my opinion, IPSU was destined to pull back given the price a gap above the 5EMA.
just my 2 cents.
joycie
Also, another thing with IPSU if you look at the 2min chart after the breakout (9:52 - 9:54)the stock printed 2 inverted hammers just above 15.2 signaling a possible failed breakout so it did give you a chance to scratch the trade or lighten up if you wanted.
MSia
Thank you everyone for the feedback on my IPSU trade, but that brings up another question I had.
I was aware of the white space on the inside bar on the 10 minute chart, but if i scale down to the 5 minute chart, obviously the space between the bars and 5ema is less.
For example, I traded FE yesterday like a lot of people in the comments, and it formed an inside bar on the 15 minute chart, with just as much white space as IPSU did today. I scaled down to the 5 minute chart in the same way yesterday as I did today and price was closer to the 5ema.
I guess my question is, is there a quantitative way that people are determining how much space between the 5ema and the bars is good vs bad? Because I like the 5ema pushing the price up as well, but no matter what stock you trade, if you move up to a higher timeframe, there is going to be a lot more white space than the timeframe being traded. I would be interested to know how people deal with this when analyzing their setups. Thanks
Nailed it on ROVI today. Entered on a break of the 7th bar, closed at the extension. I'm loving it!
Roger
I also traded FE on 5/10 over the 5th bar on the 5m chart. It had pulled back to the top of the RZ and then formed the hammer-like 5th bar. I sold right at the FE. It went up another .14, then dawdled for a few hours before falling back.
I watched PDEX from the open; it was very volatile and spready, so even if I had seen the 6th bar, I wouldn't have gotten in due to the action at the open.
I saw PAL as a short setup on the 10m chart. The 6th bar broke above the 5ema by .02, which was fine by me, and the 8th bar was .02 wide. I wanted to short 4.65 and perhaps have a stop at 4.80, .03 above the 6th bar's high, just to give it some room. However, my success with FE made me fear giving my profits back, so I passed! I have to work on that one! It sunk past the FE at 4.21, all the way down to 4.07.
MDVN looked like a setup over the 3rd 5m bar, though I didn't see it in time. However, it broke out a bit and then came back under the setup price; I thought about getting in as it went back over the setup price, but I wasn't sure if that was proper and/or if its power had been spent. It quickly hit the FE and then dawdled for about 3 hours before breaking out for more. The setup seemed quick, over the 3rd bar, but it looked valid to me. Would any of you have taken the trade?
Thanks!
T-Money,
I think the easiest way is to just keep your focus to one time frame instead of trying to base your candle stick entry off multiple time frames. Trying to compare the 10min chart of IPSU with the 15min chart of FE is like comparing apples to bananas. Find the time frame/setups that make the most sense to you and stick with it whether it be 5, 10, 15min.
MSia
Tmoney,
Take a look at the IPSU 5 min and then take a look at Rogers ROVI trade on the 7th 5 min bar and you will see your answer.
Great job, Roger! I saw ROVI too, but that 7th bar was .66 wide, which I didn't want to risk, so I passed on it. I'll have to learn to stomach the larger risks.
I missed seeing the 5th bar shooting star short on AU by a bar or two. It screamed past the extension and bounced at S2. Perhaps I should've chased it!
I watched IL spike down on the opening bar, then retrace to hit the 5ema 5m. Yes, it did retrace past the 62 fib, but the 5th and 6th bars based around 22.15 and the 6th bar had a nice upper tail. I thought about shorting under 22.15, but I didn't do it. It dropped more than $2, past the OR low before bouncing.
Thank you El Toro and MSia for making me think a little bit about the proximity of the 5ema. I will definitely watch that more closely in my future trades.
MSia, I don't necessarily agree with you in regards to comparing the 10 minute timeframe of IPSU to the 15 minute timeframe of FE being like comparing apples to bananas. I believe that a good (similar) setup should work on any timeframe, and I think I actually learned that from this site when Trader X was trading both 30 minute and 15 minute timeframes using inside bars.
However, maybe my problem is that the 10 min IPSU setup today and the 15 minute FE setup from yesterday were not as similar as I thought in regards to the inside bar. I will have to go back and study that. Nonetheless, I appreciate your feedback because it makes me think about this stuff. Thanks.
t-money,
I totally understand your frustration. I see many stocks that run after the first two or three bars consolidate at the open without the 5ema nearby, and they rip higher, while others with the same or similar set-ups falter.
I can't say I know THE reason IPSU didn't continue higher, but here are a few things I see on the chart:
1) The opening range is 5.5% of the stock's opening price. Not a giant move, but not small either. It may be that in the wake of the massive market sell-off you mentioned, the stock had given all it could give for such a bearish day.
2) Almost redundant to point #1, but market direction seems like it punished a lot of stocks that were set to move higher. I know not everyone looks at market direction, but if it's true that 3 out of every 4 stocks is affected by market sentiment, it's hard for me to personally ignore this as a possible factor in why IPSU gave up on bar 3 (10m chart).
3) Bar 2 on the 15m chart of FE is close to the support of the 38.2% Fib line, so it had support nearby, even though it wasn't in direct contact with the Fib line or the 5ema. IPSU, by comparison, on its 10m chart, is very far away from both the 5ema and the 38.2% Fib line. It has no immediate or remote support of any kind. So it didn't really spend any time building any kind of base that might help sustain a lasting move beyond the opening range high for more than one bar.
4) It could be argued that the trade did work, since the stock ran up to 4 cents short of the Fib Extension before quickly reversing. It's just that continuing up to the Fib Ext placed it even farther away from the 5ema and increased the likelihood of a reversal even more at that point.
Ideally, I like the stock to have support from both a Fib line and 5ema or 8ema. But if the ema is far away, and the stock is outrunning it, I at least like to see nearby support from a Fib line, bare minimum. And I would only take this type of risk on the first few bars at the open when the momentum is powerful enough to allow the ema to eventually catch up without the stock reversing. If it were later in the day, I would absolutely require that both the Fib line and the ema be very close or in contact with my trigger bar.
I hope this helps. :]
Chips and Salsa:
Awesome Stuff. Thanks so much for getting involved analyzing that for me.
I am actually quite upset with myself because I follow my own set of rules, and your point(#3) about the pullback to the Fib is something that I almost always check. Looking back at IPSU, for some reason I did not take that into account, and if I would have, I most likely would've passed on this trade. So thanks for pointing that out.
I was wondering if you could give me an analysis of what you think of VSH (short) on 5/3/2011 (15 minute chart). I traded this one as well and it worked out nicely, but just wanted a second opinion.
Also, do you use a specific formula to calculate the opening range of a stocks opening price?
did you guys find any good setups today?
ah i didn't see much going for today, or maybe i missed some...
5/12 trades:
I'm not sure if DVOX fits the pattern, but I found it right off the open at around the 6.80s. Too bad I didn't buy it then because it topped at 7.81! It pulled back to the RZ and set up on the 9th 5m bar. Even though it was under the 5ema, I liked the NR bar and the fact that it didn't drop below the 50% retrace. I bought 7.46. It chopped around for a bit, and I didn't like the .05 to .10 spread. Then I thought about the discussion here about too wide ORs, calculated that the OR was about 17% of the opening price, and then freaked out and sold 7.54, which was unfortunately the low (I seem to sell the low a lot)! It continued relatively smoothly and got stopped exactly at the 8.28 FE, which felt like magic to me! But was this a valid setup? It took 6 bars to reach the high, had a huge % OR, and breached the 5ema. However, it had great earnings and it woke up from sleepy trading when the momentum players found it, and I've seen these types of stocks just keep going for awhile. I do have to work on committing to my trades on setups that I like.
SYMC took 3 5m bars to form a high, and yes I missed seeing the shooting star on the 3rd bar because I saw the hammer on the 4th. I got in at 20.08 and it almost immediately hit the OR high at 20.23. It then fell back, so I sold 20.18 and kept the rest at b/e, which got hit. Later it broke out and got stopped exactly at the 20.45 FE, which got me saying out loud, "Wow, what kind of voodoo is this??" :-)
I don't think OXGN had a valid setup, but it hit a high in its 3rd and 4th 5m bar, flashed down to touch the 38 fib and 5ema, and then when on to breach the FE a bit before falling back. Later it made a lower high at the FE.
I've been really concentrating on finding these setups this week, and of the ones I found (but not necessarily entered), I think at least 60%-70% have hit their FE targets. I just have to believe! Thanks to Trader-X for this blog and all of you for the wonderful comments! I've learned a lot.
Chips and Salsa,
Are you actively looking for setups where there are no candles that close above the 38.2% retracement of the opening range prior to entering your trade or is it that nyx, jdsu, & mu just happened to setup that way today?
Noobie
Post a Comment