We talked about "quality of the pullback" last week. COG rallied from the open. The rally was three bars, and the pullback to the 50% retracement was three bars. It was what I call "orderly" - lower highs and lower lows, and the seventh bar offset the sixth and created the trigger for a nice setup. It also had support from a rising 8EMA. Entry was a break of the seventh bar high, exit was the Fibonacci extension. Notice how price never broke below the 8EMA before reaching the target.
I am getting ready for a multi-week vacation. I have made arrangements with my nephew (aka, the blog administrator) and Tom C. to make a post now and then so reader's can post comments if they want. Hopefully I will have another post or two before I depart!
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16 comments:
great trade...
Can trader-X or someone else comment on this trade?
6/8, USO, 5ema, fib lines over OR, 7th 3 min bar, orderly(?) pullback and bounce off 50% and close above 38.2%.
Would you take it or not?
Thanks a lot!
Enjoy blog very much. I think it would be helpful if those who post would say where/how they found the trade - gap scanner, news alert service, etc. Any suggestions where I can find these gap trades before the opening bell?
Thanks, Bill
TL,
My two cents, if it helps in any way. It looks orderly at first glance, but I would be wary of inside bars 4 & 5. They stall inside bar 3's range instead of creating pronounced lower highs and lower lows beyond bar 3.
Bar 7 could be seen as an offsetting or hammer-type bar, but it's not entirely textbook or representing a ton of strength versus set-ups like bar 5 on X's MTL example a few posts back, or the offestting bar 7 on COG from this post.
It may also be that 3m time-frames are much choppier and present more risk than a 10m time-frame, for example. I moved away from 2m time-frames for this reason. In my experience, I got too many stop-outs and found it too inconsistent for my taste. I know there are plenty of traders who would disagree with me, so maybe it's just personal preference on this subject.
Bill,
I use thinkorswim's free desktop scan. I think you can download the software for free, even if you don't open an account with them. I look for $10 to $100 stocks trading above/below their previous-day highs/lows. I take the top 100 by percentage gain/loss, then rank those 100 stocks by raw volume.
I don't save the final list I'm going to work with until 30m to 1hr into the session, although I watch for and will take set-ups developing on this list right from the open.
I want to see which stocks can move strongly outside their previous day ranges within the first 30m to an hour after the open. This will catch the gapping stocks automatically and still allow non-gappers to establish strong, green or red bars well beyond yesterday's ranges.
Finviz.com is another wonderful web-based, free scanner that I once used as my only scanner for months when only trading 15m and 30m charts. I no longer use it, as Finviz provides 15-20m delayed data, and I now trade charts as fast as 5m. I don't want to subscribe for real-time data when thinkorswim provides this to me already. Nevertheless, Finviz has a variety of offerings, almost all free, that can prove very helpful for daytrading and swing trading, depending on your needs.
Bill, there is a ton of conversation on this blog about how to find candidates. Use the search function, or click on the key posts link.
MOS (6/9)
2 min chart
Fib from current day first 2min bar high to previous day low
entered at the break of 9th bar
final exited at the FE (took some profits in between cuz it was choppy)
Bill i advise you to read this whole blog, it is very helpful
hard work do pays off at the end (i think)
Chips and Salsa ,
How do you scan for price above previous day's high/low in thinkorswim ?
Do you use a custom script .
I have TOS desktop and I tried playing with the scanner but I can't get it to scan for gaps or above Previous day's high.
TIA
C-Cat
Premkt Th: JVA TITN UHAL ELN MOBI BRFS VRTX. VRTX was a quick down if you had the nerve and a bounce. MOS and the ferts showed up premkt...wheat news
6/9 trades (or mistrades and missed trades)
I’m seeing the good setups; I’m just not executing well.
ESIC 2nd 10m bar
This was a fill-the-tail setup, but I failed to see that the ORH was near daily resistance. Sure enough, I got stopped out. Yes, I could’ve gotten out once I realized that resistance was there, but once I’m in a trade, there’s always hope for me; this time it turned out to be false hope. I have to remember to look at all timeframes to vet a setup.
Missed setups
JVA 7th 5m bar
This setup looked great, with the pullback bars being all hammers and the setup bar above the 38 fib. That bar straddled the 5ema, though, but I was OK with that (and it was clear of the 8ema). However, the spread was .10 (on a $10 stock), and my natural aversion to spready stocks overcame my previously stated desire to ignore the spread on good setups (I had forgotten about this, actually). I watched in agony as it kept going and going, way beyond the 200% extension (t-money, tell me you got this one! I’ll be happy for you!). There were 2 more pullbacks where I could’ve gotten in, but after missing the first entry, I wasn’t looking for any others. I see that the 5ema did a good job of supporting the stock, and I could’ve ridden it from 9.90 to 11.75; of course I’d probably partial along the way to feel comfortable. The bar was .15 wide, so if I had given it a .25 stop, I would’ve made over 7R (assuming I held all shares all the way)! I really have to learn to ignore the spread on good setups.
COOL 6th 5m bar
The setup bar here wasn’t a hammer, but it looked OK to me, especially with the rising 5ema supporting it near the 38 fib and with the pullback bars having long lower tails. However, the width of the bar was a narrow .03. When the trade triggered, the spread opened up to .03 from .01. I got hung up again like on JVA above and couldn’t bring myself to buy it. It hit the ORH quickly and then soon almost hit the 162 extension. Near the end of the day it almost hit the 200 extension. Same lesson as above.
VRTX 6th 10m bar
This stock was very volatile today, so I was predisposed to not trading it. However, right off the open it based a bit at 49 on the 1m, and I really felt that a break under that would be a good short. It was one of those intuitive, “magical” feelings; I just knew it was going to drop well. I couldn’t pull the trigger, though, and it was almost a straight ride to hell, uh, I mean 46.28. Later it formed a shooting star at the 50 fib and under the 5ema, but the bar was .70 wide. Remember though, that I had vowed to suck it up and take a wide bar trade if the setup looked good. The next bar was another shooting star, but this time the bar was only .50 wide, so I really should’ve taken the trade. I couldn’t do it again though, because of its volatility. It dropped .50 from the trigger, but then it quickly popped up to form a doji hammer and then just as quickly it hit the stop. I have mixed feelings: I could say, “Whew! I’m glad I didn’t take it since it would’ve stopped out,” but then I could also say that I failed again to take a good setup, no matter the result. However, perhaps my read on its volatility was a signal in itself to not take the trade.
C-Cat,
I set up a basic thinkscript code after e-mailing their support team. For my longs scan, I added this custom filter:
close > high[1]
This will scan for stocks that "close" (i.e., that trade) above the high of the previous one day (i.e., above the high of yesterday).
For my shorts scan, I added this custom filter:
close < low[1]
This will scan for stocks that "close" (trade) below the low of the previous one day (yesterday).
In these custom scripts, the "close" means the most recent, real-time price that prints on the chart. "Last" would have made more sense, but thinkscript only accepts the word "close" for this function.
The "[1]" indicates the previous one day, i.e., yesterday. If you prefer a longer period of, say, 20 days, you can enter the value of "[20]", and it will only find stocks "closing" (i.e., trading) above/below the highs/lows of the last 20 days.
TOS's "Public" drop-down menu has many predefined scan criteria, two of which are "Gap Up" and "Gap Down". Please be aware that TOS's Gap criteria only include stocks that trade entirely outside the previous day's range. A single penny inside the previous day's range will disqualify the stock and automatically remove it from the list, even intra-day. This can be changed by the user, however.
You will see TOS place these scripts on your scan by default, depending on which one you select:
low > high[1]
OR,
high < low[1]
Let's say you'd rather see gaps that open above/below the previous day's final closing price but not necessarily above/below the previous day's high/low. The script can be edited by changing the default code to:
open > close[1]
OR,
open < close[1]
You can save all of your criteria so you don't have to repeatedly rebuild your scan, and it will appear under the "Personal" folder for future use.
I hope I got all of the above correct for you, but I'm not an expert in script-writing, so I'd encourage you to contact thinkorswim's script team to make sure what I'm laying out here is presented accurately.
Whew! I need to get some fresh air outside now. Have a great weekend, all!
Chips and Salsa ,
Thank you very much for the detailed explanation about TOS scans. That was really helpful.
I was able to run the scan successfully and got the right results :-) .
C-Cat
Klaorman,
i've traded JVA from the 7th bar
F.line plotted over openning range 5 min bar
i've close the entire position at the F.extension line after a fast 6% gain as on prior situations it didn't pay of keeping part of the position.
So , of course, the market teaches us everyday something , (and also Murphy's laws) and the stock continued another 2$ without me...
US
Best blog ever :-)
Chips and Salsa... thanks for sharing the scanning method. i am sure it will be very helpful.
Chips,
Thanks for the insight. I need to take a deep look into those sutble things!
US, that was still a great trade. Notice, though, that the 5ema would’ve kept you in until about 14.63. Yes, I would’ve found it hard to hold that far, but I would’ve partialed on the spikes. I had JVA up on my charts, but I never saw it at the right times. I see that there were 3 bullflags, a breakout from a base, and a double top to play! I couldn’t find anything else that day that looked like a Trader-X play.
My 6 year old computer finally gave up the ghost this weekend, so I bought a new one and am spending my time setting it up. (Wow, it’s so fast!) I didn’t trade today (6/13), but I did see that the 8th 5m bar on ORS was a nice setup, even though ORS wasn’t much of a gapper. The setup bar was a hammer above the 38 fib and was supported by the rising 5ema. It hit well beyond the 200% fib extension, and the 5ema would’ve kept me in from 4.35 to the 6.30s.
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