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Thursday, June 02, 2011

Catching up

I was originally going to use the short week to kick off a vacation that would last most of June, but due to the passing of my family member I have had to rearrange some plans. I'll be here for a few weeks, and with any luck will be able to take my vacation at the end of June/beginning of July.

Last Friday I talked about the quality of a pullback in relation to setups in BRCM, MCP, and MTL. Below are the charts so you can judge for yourself. In future postings I will try to provide more analysis on this topic, but if you study the charts I think the differences are apparent.

Several readers traded BRCM and stated it didn't work out. I offered the two setups below in comparison.

Entry was a break of the ninth bar's high.

Entry was a break of the fifth bar's high.



Klaorman said...

Hi Trader-X,

The other day you didn't like an earlier bar entry on KKD because you didn't like its interaction with the 5ema. However, MCP's setup bar's real body straddled the 5ema, but it's still valid to you? Is this because the 8th and 9th bar negated the red 7th bar?


Klaorman said...

I had connection problems all day yesterday and didn’t trade. After getting back online I only saw JOSB as a 15m short. Anyone see/trade anything else yesterday?

6/2 trades

VRA 7th 5m bar short
This down gapper retraced smoothly to the 38 fib and the 5ema. I eyed it during the 7th bar, but then missed it as it triggered. It dropped quickly, but then just as quickly it popped up and technically breached the high of the setup bar, running to 42. However, with the high of that bar at 41.94 I would’ve put my stop at 42.05, on the other side of the whole number, so I would’ve still been in. I wouldn’t have liked the quick pop, though, and probably would’ve covered already long before it sniffed 42. But for someone who could’ve held on, it did hit the FE. So again, that means that I have to learn to close my eyes and trust the setup.

CHRS 2nd 15m bar
Somehow this gapper escaped my list, probably because the premarket volume was very low. It dropped from the open and then formed a doji hammer at R2 and the 38 fib (fibs drawn from yesterday’s low to today’s OR high). It printed green bars all the way to the FE, where it hit a wall.

AFFX 2nd 15m bar
The 2nd bar filled the upper tail of the 1st bar. I bought the breakout, but then it didn’t do much, creating upper tails on the 3rd through 6th bar. With the market falling and AFFX finally dropping under the whole number, I sold early, before my stop. Selling early before my stop is a major fault of mine (I call it jumping my stop), but in the face of such “evidence” (market falling and topping tails), I felt that I had to sell. As is usual when I break my rules, AFFX stabilized around my stop jump, but it only got back to the whole number. Regardless, I have to stop jumping my stops.

HIL 3rd 15m bar
This stock had less than 10K of premarket volume, but since its average daily volume was only 88K, I was interested (uh, joshua alert again!). I should’ve bought it right at the open as it shot out of the gate. The 2nd bar pullback was very shallow, and the 3rd bar almost reached the 1st bar’s high. I had already seen that its spread was around .06 (on a $6 stock), so I was already wary as it broke out. It looked volatile on the breakout, so I passed on it, but it smoothly hit the 162 extension (on fibs drawn from Friday’s low to today’s OR high). It traded 70x its average daily volume. After it hit its highs, it pulled back and bounced from its 38 fib (drawn from today’s low to high) and almost hit its highs again.

OWW 4th 15m bar
This stock gapped up huge and started dropping. The 3rd bar was a red hammer above the 38 fib (drawn from yesterday’s lows to today’s highs), so I set an alert at the high of that bar. I didn’t see the 4th bar form a narrower red hammer, so when the alert hit, I was a bit late. I also didn’t see that the 10m chart had an even better setup. I tried it anyway with small shares, but I jumped my stop at around the same time as I had done with AFFX. My target was the highs at 3.23, but it stalled at 3.

DV 4th 15m bar
This stock gapped up big (as did all the education stocks) and fell from the open. The setup bar was a slightly red hammer with its tail almost tapping the 38 fib (drawn from yesterday’s lows to today’s highs). I didn’t see the bar at the time, but it was .86 wide, which I most likely would not have taken. It started slowly, but it eventually hit the OR high exactly, which was about $2.50 away.

Trader-X said...

Klaorman, good question and I need to clarify. I use the 5 and 8, and look for a nice move off one or the other. The earlier entry in KKD didn't meet that criteria. With MCP, it was messy with the 5 but if you remove it and just look at the 8, you will see a clean move off that level. So, one or the other.

Also, you are 100% correct in your "bar by bar" analysis. the 8th and 9th negated the 7th which was really weak.

Anonymous said...

I learn something new every time I visit, Thanks.


t-money said...


Good spot on VRA. I traded that one as well today (6/2). However, I traded it on the 10 minute timeframe below the low of the 5th bar.

The stock moved down off the open and pulled back nicely to the Fib RZ as well as the whole number of $42. Once I got in, I managed the trade on the 5 minute chart and exited as it stalled at the 1.382% Fib extension as well as closed above the 5ema.

Hope everyone else had a good day out there.

Klaorman said...


Wow, another great example of holding the 5ema, similar to your trade in ARUN a couple of weeks ago. VRA did pop about .50 along the way, but you didn’t care or see it. I’ll have to button it down and trade like t-money! :-)

It’s interesting, though, that you entered on the 10m and managed on the 5m. The other day I took a trade on the 15m and watched the 5ema there for the exit.

From my posts, I’ll also have to learn to trade setups with wider stops and wider spreads, since the ones I saw and avoided have almost all worked well.

timo4sho said...

what do you guys think of building a group of like-minded traders on twitter or stocktwits and everyone just shouts out the good looking stocks he sees setting up for trading the x-style ;-)

Since we all have pretty much the same way to approach the market and are looking for the same setups, this could be beneficial for all?!

Michael said...

Tim, I would advise against it. First, it is hard enough trying to find setups and trade without adding the distraction of having to post what you are doing. Time is limited and things move fast, and that just leads to more mistakes. Next, even though everyone would be focused on similar styles, there are nuances in how everyone trades and the setups they take, as can be witnessed by this post on BRCM vs. other setups. So, my point is you may end up taking setups that you might otherwise skip and losing money.

Just my opinion. I have been part of several similar groups, and it didn't go well in the long run.

t-money said...


I agree with Michael. I have been part of groups or chat rooms like that before and it becomes a mess, at least for me. There were usually so many people shouting out stocks that I would start to focus only on the stocks being shouted out, and forget to look for my own setups.

That would lead me to trading the shouted out stocks that didn't necessarily fit my trading style. Also, I found that it was hard not to shout out stocks prematurely, because if you wait for the confirmation bar for the entry before shouting it out, the move is already underway before people can jump in, and vice versa for trading the stocks that people are twittering. This lead to a lot of people constantly shouting out comments like, "this stock looks like it might set up here", only to have the stock fizzle out, and missing better setups.

However, I know that there are a lot of successful people out there that use those type of groups (like Trader Stewie's chatroom), I'm just not one of them.

timo4sho said...

Thanks Michael and t-money,

fair enough and totally understandable.

It was just an idea, but I understand where you guys are coming from.

Times of Your Life said...

ya everyone trade differently, Trader X just give you an idea of how to trade and how to manage his risk and reward.

patient to wait for entries and follow your own rules are the key