A trade from Chris...

"CIEN, 15-minute chart, Fibonacci lines over the opening range. Price chopped around the retracement zone and then formed a nice hammer on top of it at 11:45, with support from the 5EMA. I exited at the Fibonacci extension, and re-entered on a break of the 1:30 hammer bar for a "beyond the Fibonacci extension" setup. I exited at $13.50 for a nice gain."

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Looking at Facebook

Since there is a lot of talk in comments about FB, I thought it would be interesting to look at the action of the first 8 days.

If you plot Fibonacci lines over the first and second day, you can see that - after the short-lived bounce on day 2 - price gapped down below the low and then tested that low as resistance multiple times over days 3-6. It then started a three day move down that culminated with price nailing the Fibonacci extension and breaking below it late today.

I offer no predictions, but it seems to be at a decisive point here. It can either form a "Beyond the Fibonacci extension" setup and move down to the $24-$25 range, or it can retake the 100EMA with the potential to make it back to the retracement zone.

Tomorrow will be interesting to watch. All in all, I'm glad I avoided the Facebook hype!

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VMW - 052412

Charles posted this trade in comments - check out his analysis here, as well as other trades and more Facebook talk!

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LBTYA - 051812

Friday's trade brought to you by Warren:

"Shorted LBTYA on a break of the 13th bar. It was a nice pattern that gapped down, pulled back, and then broke back through the previous low of the morning. The trigger bar closed below the morning low, had a long upper tail, and resistance from the 8EMA. Covered at the Fibonacci extension at the end of the day. 15-minute chart, Fibonacci lines over the first 30-minutes range."

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GRPN - 051412

Very insightful comments over the past few days - a lot of good trades and analysis, so check them out.

Here is a trade from Brian:

"Started the week out with a nice trade. GRPN, 15-minute chart, Fibonacci lines over the opening range. Price pulled back to the 61.8% line which was a little deep, but it recovered and I entered on a break of the 14th bar when it crossed back above the 38.2% line. It had support from the 5 and 8EMAs, and I rode it to $12 where it stalled out."

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ADM - 050112

In the comments of the previous post, there is good analysis of trades in the following ADM chart, including discussion on targets, when to exit, and second entries. There are also many additional trades discussed - I will let you pull those charts up on your own.

Here is the ADM chart - refer to the comments of the previous post for analysis.

I am still enjoying Spring, so posting will be sparse for a while. But that should not keep you from going through, and participating in, the comments section!

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A short week

I'm taking time off to enjoy the Spring. Here is a trade from Chris, and I'll see you guys (maybe) next week!

"BHI was a gap up. 15-minute chart, Fibonacci lines over the first three bars opening range. I didn't like the high tail on the third bar, but the trigger bar (5th bar) filled it in as it was a strong, green bar. I entered on a break of that bar's high and exited at the Fibonacci extension. What I call a classic X trade, though it may not meet your strict definition."

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A trade from Dan...

As noted in the previous post, I am taking a few days off to enjoy Spring so I am behind on looking through comments. Here is a trade and question from Dan on Thursday:

"I traded EBAY on a 15-minute chart, Fibonacci lines over the first three bars. I entered on a break of the third bar high, and sold at the Fibonacci extension. The only red flag was the bar was a bit far away from the 5 and 8EMAs, so I am not sure if that meant most would pass on it. The price action of the first three bars was strong, though, so I thought the risk worthwhile. I appreciate any feedback."

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Charts from "comments"

There have been some good trades discussed in the comments over the past few posts. Here are a few charts - please reference the comments of the last post for details. Both trades are from last week.





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A trade from Ed...

Ed has posted several trades in comments recently. Here is one from today:

"MRX, 15-minute chart, Fibonacci plotted over the opening range. I entered on a break of the 4th bar's high. The 4th bar was a hammer, and price bounced off the top of the retracement zone and the 5EMA. I exited at the Fibonacci extension for a .35 gain. I hope everyone has a good three day weekend!"

Here is Ed's chart with the trigger bar marked:



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Another trade from David...

"This was similar to my TOL trade last week, but I prefer these three bar setups because they happen faster. 15-minute chart, Fibonacci lines over the first three bars, entry on a break of the third bar high. The third bar was at support from the 50% retracement, the rising 5EMA, and it was a strong bar that closed at its high. I sold at the Fiboancci extension for a .40 gain. There was a "beyond the Fibonacci extension" setup later in the day, good for another .40, but I missed it."

Here is David's chart with the trigger bar marked:



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A nice trade from David

"This was a perfect setup, so I couldn't resist commenting. TOL, 15-min chart - price rallied after a gap up, wide range first bar, my Fibonacci lines plotted over the first two bar's range. Price pulled back to the top of the retracement zone and formed a nice "offsetting bars" pattern, and had support from the 5EMA. I entered on a break of the 5th bar's high, and sold at the Fibonacci extension. Classic X setup that worked perfect!!!"

Here is David's chart with the trigger bar marked:



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A trade from John

"I'm not sure if my trades are worthy of highlighting, but maybe it is good for comments section. It is a little similar to the two charts from David and David - classic X type setup, 15-minute chart, Fibonacci over the opening range (symbol = GLUU). The trade is later in the day, however, so I am not sure that X would take it but other readers might have. Also, I use a trendline on this chart. Here are the specifics: Gap up, rally, pullback - the pullback never closed below the 50% retracement. Trendline from the pivot high on the third bar to the 12th bar. Entry was a break of the 2:30EST bar's high - that bar was also a hammer, and price had broken the trendline, and had support from the 8EMA. I closed the trade with a .20 profit which doesn't sound like a lot, but due to the price of GLUU it was actually over 4% gain."

Here is John's chart with the trendline and trigger bar marked (John, if I drew the trendline wrong please let me know in "comments"):



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Another David, another chart!

"X, I have found that these setups tend to work nice: a gap down, and a move back up though the previous day's range, with a setup after a pullback from the high. An example would be DTV from today. 15-minute chart, Fibs over the opening range first three bars, and I entered on a break of the 5th bar high after price had a brief pullback and found support at the 8EMA. The entry signal was what you referred to as "offsetting bars". I sold six bars later when price hit the Fibonacci extension. Just curious if any other X readers trade this kind of setup.

David"



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A chart and question from David...

"My go-to trade is a variation of an X classic. I trade 15-minute charts and plot my Fibonacci lines over the opening range. I look for a pullback to the 50% level, and a valid candlestick pattern and support from a rising 5 or 8EMA. An example from today is VRML, where I entered on a break of the sixth bar's high. I also trade the "beyond the Fibonacci extension" setups a lot on these types of trades, but for the purposes of this comment I just want to discuss the initial setup described above. I have been trading it for 13 months now, and crunching the data my win rate is around 63%. With good money management, it has been a profitable setup but I am curious if any readers have been able to tweak these to get the winning percentage higher. Feedback is appreciated."

Here is David's chart:



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A trade from Chris...

"I made a profitable trade today and wanted to see if you guys thought it was a good setup, or just luck!

FNSR - 30-minute chart, entered on a break of the 3rd bar high, exited at the 8EMA for .50. Reason for entering - wide range first bar, narrowing 2nd and 3rd (inside bars), and 3rd bar was hammer like. My only concern was the upper tail on the first bar, but the body was solid green.

Thoughts?"

Here is Chris' chart with the trigger bar marked:



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A trade from Tom (not Tom C.!)

"Because my name is Tom, I've always been partial to Tom C.'s setups. :)

I mixed Tom C. with Michael, and traded HPQ on the 30-minute timeframe yesterday (Thursday, 02/23/12). It was a "u-turn" and reversion to the mean. I entered on a break of the 3rd bar high - price gapped down with a wide-range first bar, the second bar was strong and signanled a potential reversal, the third bar formed a hammer in the top of the second bar's real body. Sold for a .50 gain as it got close to the 8EMA!

Thanks for all the knowledge on this site."



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Promoted from comments...

John posted this trade in comments, looking for feedback:

"I had a homerun with LL today on the Michael setup. Gap down, wide range first bar, second bar narrow range doji (which led me to believe the downmove was stalling). Entered on a break of the second bar's high, rode it to the 8EMA for a little over a dollar gain. Question for Michael and anyone else - would you have taken this setup even though the second bar was slightly red? Thank you in advance."



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A trade from Brian

There have been a lot of great comments about Michael's setup, including charts and analysis of what did and didn't work. Brian has contributed a lot, and here is a trade of his from today:

"I entered BMRN on a break of the 4th bar high. The first bar was very strong and wide range, but didn't hit the 8EMA. The 2nd and 3rd bars pulled back, and the 4th bar was an offsetting bar. I'm not sure this is a great example of Michael's setup, but I have seen these work well on both the long and short side. I sold when price hit the 8EMA for a .50 gain."



Brian also discussed a trade that didn't work (WSH) and a few more that did (ABB and NILE) in comments of the last post. There is some good input from Tom and TT as well.

I'm looking forward to highlighting more of your setups and trades in the weeks ahead. Don't forget that the markets are closed on Monday!

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A few trades from Michael

These trades are submitted by Michael. Here are his comments:

"As you noted in a past post, I trade reversion to the mean type setups and I don't use Fibonacci lines often (though I use them some). Basically I look for a strong gap up or down with a lot of white space between current price and the 8EMA. I look for a signal using candlestick charts (and my experience interpreting them), and usually exit when price moves back to the 8EMA.

I also trade longer timeframes - predominantly 30 minute charts. I find that the setups for these types of trades work better on longer-term charts. They do work on shorter timeframes as well, but there tend to be a lot more failures.

A few more tips: movement is key...don't take setups that are in a range. Wide range bars followed by reversals work best (see example 1 below), or an obvious movement out of a trading range (see example 2 below). But, trading a signal that doesn't move out of a trading range (ie, forms in consolidation) is a recipe for disaster. Also, I don't enter trades much after the first three hours, and I prefer setups that work off a gap as opposed to just a sharp move that creates a lot of white space.

Here are two examples from Friday:

GDI - very wide-range first bar. Narrow range 2nd bar. Entry on a break of the 2nd bar high. I closed the position 3 bars later - just shy of the 8EMA - after the 3rd-5th bars all left upper tails. "




"GSVC - this setup represents a movement out of a trading range, in this case a trading range formed by the 2nd-3rd bars. The 4th bar was a strong move up, and the 5th bar was a strong hammer. I entered on a break of that bar's high. I closed the position when price rallied but fell back below the $16 whole number mark."




Be careful with these types of setup - it can be like trying to "catch a falling knife" (for a long entry) or "stepping in front of a moving train" (for a short entry). There is a lot of risk, but if you know how to read and interpret candlestick charts there is a lot of potential. Let me know if anyone has questions.

X note - I marked Michael's trigger bar with an arrow; the entry was a break of that trigger bar's high.

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