1.) Even though Fred took profits at the halfway point between the high and the Fibonacci extension, it is interesting to note that the setup did eventually reach the FE, and would not have been stopped out (assuming the stop was the opposite extreme of the entry bar). I am not pointing this out to say Fred should have held - in fact, I think he did the right thing and took profits at a critical point once he saw weakness and resistance (see his analysis). I am only pointing it out because it is always interesting to see how these things play out.
2.) The high tails on the first and third bars made this a riskier setup than usual. It is fine to take a setup with more risk, as long as you acknowledge and plan for it. The tails are most likely the reason the setup took so long to unfold. For those of you guys who insist on looking at setups later in the day, QCOM presented a few opportunities to enter as it tested and successfully bounced off of the Fibonacci zone.
From Fred:
Took QCOM today, 5-minute chart. I think it was a perfect setup on a break of the 5th bar, which was rising off the 8EMA and bouncing off the 50%, not to mention offsetting bars. It didn't make it to the extension, but I took .40 out of it and was anticipating a possible reversal as resistance was at a whole number ($57), and it was the halfway point between the high and extension. The doji 10:15 bar confirmed, and I took profits. In retrospect it would have been a great short.
Thanks for pointing me in the right direction. I am consistently finding good setups and winners, or not trading.
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12 comments:
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7/19/11
DHI, 15m, 8ema, Fibs OR, entry above bar 11, 2R profit. Never reached the FE, even though I held out for it.
PM, 30m, 5ema, Fibs OR, entry above bar 3, 3R profit on surge beyond FE, and it kept going for another 1R without me, but no worries.
Thanks, X. You have really helped my accuracy rate significantly. Hope to return the favor someday.
7/20/11
IDCC, 15m, 5ema, Fibs OR, entry above offsetting bar 5, exit just above FE at $67, 5R profit. This stock drifted all day, then rocketed upwards at 2:30 EST. Rallied on without me to $70, but I'm not complaining.
I had several losers today too. But this one trade made up for them to give me a net gain for a very choppy day in the general markets.
Just for the record, I took some crappy set-ups that I had no business taking, including WFC and QCOM on the 15m charts. That's why I had one too many losers today. Just shows that wandering off the map will end in losses.
7/20 trades
ONTY 4th 5m bar
This gapper started dropping right away, so I drew fibs from PDL to ORH. The setup bar was a hammer at the 5ema and R2. I got in at 9.58. The stock hit 9.84 easily, but then it started drifting down. Normally I would’ve freaked out and sold on the way down, especially when it dropped under my breakeven by .05. However, I had just read a thread on Elite Trader that discussed not moving to breakeven too soon, so I accepted my original stop and held on. I was rewarded later with a partial at the 9.95 ORH and another partial at 10.25 after it had hit R3. I then thought that I should look for a bounce at whole number 10, so I set an alert at 10.03, but when it fired, I didn’t add. It turns out that that was the exact place to add! After it bounced back up there was a flag on the 5m for another add, but I didn’t see it. The FE was 10.65; my target was 10.60. When the stock got there it looked like it might keep going, so I set my stop at 10.43, under the 5ema, but it quickly turned around at 10.61 and stopped me out. All in all, a very nice trade for me.
JAG 9th 5m bar short
This shooting star at the 8ema and 38 fib looked great to me, but it just went sideways all day.
Missed trades
I missed some nice trades today. I have to be more vigilant in flipping through my candidates. Gotta flip ‘til my eyes bug out!
TXT 5th 5m bar
I completely missed seeing this red hammer at the 5ema until later. The stock hung around the ORH for 3 hours before bursting forth on volume at 2pm to almost hit the FE.
FFIV 9th 5m bar short
I also missed seeing this shooting star at the 8ema, though it was deep in the RZ. It did come back above the entry price later, but I didn’t take it. It chopped around all day until it approached the ORH near EOD.
ARUN 14th 5m bar short
Again, I missed seeing this green shooting star at the 8ema. Admittedly, the ema wasn’t down sloping at the time, but I think I would’ve most likely taken the trade. The stock quickly hit beyond the 162 extension and then later had resistance at the FE and whole number 26 for a beyond the FE setup, which I didn’t recognize at the time.
MUR 8th 15m bar
I saw this NR green bar at the 5ema a bit late and didn’t take it. It didn’t do anything for the rest of the day.
ECL 8th 15m bar short
This shooting star at the 5ema set up an easy short to the ORL and the bounce at round number 50.
7/21/11
I traded BRY on the 10 Minute chart after the 6th bar, which was bouncing off of the 5ema as well as the RZ. I thought this bar would offset the prior red one, but I promptly got stopped out. Any suggestions on why this setup was not a good one to take would be greatly appreciated.
7/21/11 trades
GNW 5m bounce
Here’s a bounce play that I like to look for. GNW gapped down and kept dropping off the open with wider bars, but then it slowed down and printed a hammer on a high volume bar. It based for a bit and then created a higher low. I entered over the base (at the first green arrow) with a stop under the higher low. My target was the 20ema (the blue line), but when the stock had a high volume run to whole number 8, I sold there (at the first red arrow). It then based for a bit and created another higher low. I got back in over that base (second green arrow) and sold near HOD (second red arrow).
BCS 10th 10m bar
This was a hammer at the 8ema and 38 fib. The stock tried, but it didn’t do much; I sold EOD for a few pennies.
FNGN 7th 15m bar
This was a red shooting star, but it was narrow and at the 5ema and slightly under the 38 fib, so I decided to try it. I gave the stock a bit of room under the bar, but I still got stopped by a penny. However, it didn’t do much for the rest of the day.
ZLC 10th 15m bar
This green bar was at the 8ema, but under the 38 fib, and the 6th bar was a green shooting star. I ended up with a few pennies by EOD.
Missed trades
What?? Wasn’t I supposed to be super-vigilant and not miss any trades? Alas...
SINO 5th 5m bar
This crazy 2nd day wonder shot out of the gate and then based at R2 and the 5ema. I alerted the breakout over the base, but when it came, I hesitated because it looked very volatile and capable of ripping my face off. That’s no excuse though, since my stop was clearly defined. It quickly hit the ORH, rested, and then shot up to the 162 extension.
CRUS 5th 5m bar short
This shooting star looked great, though it was a bit away from the 5ema. I was a little late seeing it and didn’t want to chase it. It almost made it to the ORL, where I likely would’ve partialed; the rest would’ve stopped out.
CHSI 8th 15m bar short
This spinning top was slightly under the flat 8ema and under the 50 fib, so I was doubtful, but once it broke out it blasted off for 2 bucks to breach the ORH.
I actually only missed seeing one trade; the other two stared me down and caused me to chicken out.
t-money,
One thing that has burned me repeatedly that you point out here is that bars 4 and 5 have long upper AND lower tails. These are the types of bars that hurt when an offsetting bar later presents itself.
An upper OR lower tail (but not both), if not too dramatic, is more consistent when a subsequent, offsetting bar forms against it.
Bar 5 especially represents too much indecision and creates a dangerous lure when the offsetting bar 6 forms.
I've also noticed an offsetting bar has a higher probability of delivering a profit if it resembles the range, and sometimes even the shape, of the previous bar. In BRY's case, the offsetting bar's range is only 60% of the previous bar's range.
30m charts for both C and CSCO are good illustrations (7/21/11) of what I'm referring to in candlestick formation. In both stocks, bar 4 is offset by a similar shape and range in bar 5.
BK, 30m chart, bars 5 & 6 offer another good example.
10m chart example would be DIS, bars 8 & 9. Also, bars 14 & 15 on C.
Each time the offsetting bar is similar in range and shape, it offers a better chance of delivering a successful trade, in my experience.
Doesn't have to meet these criteria to work out, of course, but I have had better success following this guideline when it comes to offsetting bars. It presents much more orderly price action.
Hope this helps you, sir.
Upper and lower tails represent a doji, which by definition is indecision. It is a crap shoot which way it will go.
Mike
Mike,
Right on, I concur. Although in BRY's case, the 10m bar #5 is not a perfect doji. The bottom tail is almost twice the size of the top tail, but maybe that's splitting hairs on my part. I think we're in agreement on what the tails represent.
As odd as it sounds, I've often seen green dojis offseting identical red dojis at support. They act like perfect offsetting bars due to their similar or identical shape and size. In these cases, they seem to confirm a successful set-up as well.
Chips and Salsa,
Thanks so much for the explanation of the offsetting bars. I think that will help me a lot in trading those types of setups.
Klaorman, I get a lot from your posts. Thanks!
7/22/11 trades
After missing out on so many trades in the morning (see below), I took a couple of marginal frustration trades. One worked, but the other didn’t.
RRR 9th 15m bar
This red hammer was at the 5ema, but the ema was flat, not rising. There was also a red bar during the push up and a green doji during the pullback, plus it was almost doldrums time. I got stopped out quickly.
ENTG 10th 15m bar
This was a NR red hammer at the 8ema and 38 fib, but R2 loomed overhead, plus again it was almost doldrums time. I took the trade anyway; the stock tried to shake me out, but I held on, sold half at the ORH, and sold the other half at EOD (back under ORH).
Missed trades
FLEX 3rd 5m bar
I saw this ascending triangle/pseudo fill-the-tail setup a bit late, at 6.65, and hesitated as usual. Later, the stock came back down to 6.61 from 6.73; I thought it was failing, so I didn’t pay attention. I forgot to draw fibs on this chart, but it clearly pushed past the 200 extension, where fibs are drawn from PDL to ORH.
SFG 3rd 5m bar short
I saw this seemingly zero-wide doji and was intrigued; it was slightly beyond the 38 fib, but not near the 5ema. The next bar confirmed that a reversal was probably starting, but the stock was in circuit breaker mode, so I had to wait for an uptick to hit the bid or I had to post an offer. I’m not comfortable doing either, since to me it feels like the stock will go the wrong way. I have to suck it up and learn to get into these circuit breaker setups, though, since the stock fell $2 from the doji.
RT 5th 5m bar short
Shooting star near 5ema, circuit breaker status, same story as SFG. Hit the ORL.
CX 9th 5m bar short
This shooting star was at the 5ema, but it was only about halfway between the 38 fib and the ORL; the potential to the ORL support was only .07 or .08, so I passed. The stock hit the ORL, but then it bounced and would’ve stopped out.
HWAY 9th 5m bar short
This shooting star with a wide body was at the 8ema and 50 fib, but again it had circuit breaker status. You know the drill; I would’ve partialed at the ORL and tried to withstand the bounce (and I should’ve been successful, since I’ve had 2 nice holds to targets in the last 2 days), and covered the rest at the FE.
ARCO 10th 5m bar
This was a hammer at the 8ema and 38 fib, but it had a wide red body; I was undecided because of this, but the stock quickly exploded to the FE, where it magically stopped.
EXPW 5th 15m bar short
This was a nice shooting star at the 5ema and 38 fib. I don’t remember why I didn’t trade this stock, but it would’ve stopped out.
The main theme today: Find any way to get into nice setups.
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