GME - 051911

Posted by Tom C.:

Here is something a little different. This was a gap down, but it rallied to take out the opening range high (ORH). When I see this, I keep an eye out for a pullback from the new trend (new trend is up, whereas the initial trend was down (gap down, decline)). At 10:10 the new high was made, and the pullback started. It fell through the retracement zone (rz), but quickly rallied and moved back above it. There was a nice pattern with support from the rising 5EMA, and I entered on a break of the 11:25 bar. My target was the Fibonacci extension (which corresponded nicely with the $26 level and a declining 100EMA), and it was hit three bars later.



Price chopped around at that resistance and then presented an opportunity for a "beyond the Fibonacci extension" setup. I didn't take it, as it was lower probability moving into the previous day's range (it worked nicely, though).

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Update - 051711

Posted by Tom C:

I wanted to drop in and give a quick update - as many of you know, Trader-X has been dealing with a family situation and unfortunately he has had a family member pass away. As a result, he won't be back until sometimes next week.

I will try to post a chart or two this week and put up some fresh posts for those of you who are communicating through comments.

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Welcome to a new week!

Posted by Tom C.

I am extremely rusty at this, so don't judge too harshly. As you probably realized, X disappeared for a few days. Now that you see the news headlines over the past 24 hours, you know why. He won't be able to discuss his role, as it is all highly classified. But I for one want to thank him for his service.

OK, if anyone is offended by my attempt at humor, I apologize. But I could not resist! X is dealing with some family issues, and my thoughts and prayers are with him. In the meantime, I figured I will try to brush the dust off my posting skills and put up a chart or two.

Today offered a lot of nice short setups, with GG being one of my best trades. The setup itself can be classified as a "beyond the Fibonacci extension". GG gapped down, bounced at the FE, and made a relatively normal retracement back to the RZ. At that point, it turned back down and broke through the FE. I drew a trendline (solid black line right below the FE) which was broken around 1PM EST, and then price pulled back to test the FE and the trendline from the bottom (support is now resistance). Price formed offsetting bars at that level, and I entered on a break of the 1:30 bar. My stop was if price closed above the declining 5EMA, and it never did. Price collapsed, and I covered at $53. It continued down to almost $52 before bouncing.



Depending on X's return, I may come back later in the week with a few more charts.

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The evolution of my strategies (part 2)

There is some great analysis in the comments of the last post...take the time to read them.

The first thing I will discuss is plotting Fibonacci lines. There are numerous ways you can do this, and if you have read this blog, Tom C., Trader Jamie, TRADEthemove, or the other resources that are out there you will see many different ideas. And, they all work! As I said before, the key is finding what works for you and sticking with it. You can plot lines over the previous day's range, the previous two day's range, the previous day's open/close to the current day's close/open, the morning session's high/low, or most swing highs/lows (et cetera) and they will all yield valid setups. But if you try to chase all of those different methods over the course of your daily trading, you will most likely miss the good setups and your performance will be mediocre at best, and a disaster at worst.

Consistency is key - there is an old saying, "if you chase two rabbits, both will escape." Figure out what works for you and your style, and focus until you perfect it!

As I mentioned in the last post, I am focused on making the majority of my money in the first hour (or two) of trading. I have found that plotting my Fibonacci lines over the previous day's close to the current day's open yields the highest probability setups for that timeframe.

If you plot the Fibonacci lines as such on the GMCR chart (see below), you will see that price rallied off the opening low, through the retracement zone (RZ), through the Fibonacci extension (FE) and then pulled back to form a hammer-type candle (5th candle) above the FE. There is a setup that readers of this blog know - "beyond the Fibonacci extension"*** - and GMCR forms it in a near textbook manner ("near textbook" because I would have preferred the 5th candle to be a green hammer, but nothing is perfect).

Based on just this information alone you had a valid, high-probability entry. But there are a handful of other indicators that contributed to GMCR being a solid opportunity. I will discuss those in the next post.



***use the search function at the upper left of the site to find similar setups.

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U-turn and blogging

Posted by Tom C.

RIG was a good setup earlier this week, showing that the "u-turn" setup is alive and well.



It is time to come clean - me blogging on a regular basis is probably not going to happen. I wanted to carry on in X's absence, but I have other priorities that require my attention. The best time to blog is when the market closes - post a few charts and comments from the day's trading. But I have a routine that includes working out, family, and [purposefully] being away from the market. As a result, I can't motivate myself to get around to it.

I will still post periodically, but probably once or twice a month. I suggest you subscribe to the blog (see the options at the top of the page) and you will be notified when a new post appears.

In the meantime, check out the other great bloggers that appear on the sidebar.

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For all of you "comic book" movie fans...

Posted by Tom C.

Another Iron Man 2 trailer...it looks to be good.



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A few charts...

Posted by Tom C.

Here are two of my favorite charts from this week with brief explanations:

AMLN - a classic cup and handle pattern with consolidation at the previous high (which was the handle), and a three bar pattern that offers a very high success rate:



Note that the target (FE) was just a few cents below a whole number ($24)...see my previous posts if you don't understand my point here.

ABX - another pattern with a high success rate - a gap up with a first bar close in the top half of its range, the second bar is narrower but stays in the top half of the first bar's range, and the third bar was a nice "hammer-type" candle that closes green and just above the morning high.



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Back to blogging?

Posted by Tom C.

The February vacation was unbelievably exciting. I returned back to a "normal" routine the first week in March, but have not made it back to the blog until now. I will try to post a few trades next week.

I hope 2010 is starting off great for everyone. Spring is in the air, and so far the new year has been good to me and mine!

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BJS - 012610

Posted by Tom C.

I am getting ready for vacation in February...I will be gone most of the month on 2 separate trips. I will try to finish this week off with a few posts (edit - didn't happen, sorry!), and then hopefully resume in March.

I am posting the chart of BJS because it was a classic setup, albeit slightly higher risk as the entry was below the opening range high (ORH). It also drives home the point I have been making since 2009 - watch those whole numbers. BJS reversed at $22, which was just above the FE.



edit - I entered on a break of the 4th bar's high, and sold just under $22 after price broke through the FE.

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BK - 012010

Posted by Tom C.

I don't always use trendlines, but when I see something I consider obvious I will. To me, the trendline I drew on BK was obvious; looking at the bigger picture price gapped up and after a short rally pulled back to the RZ and bounced off that level. There were some possible, more aggressive, entries prior to the one I actually took - but I opted to enter on a break of the strong green bar's high that formed above the trendline.

I watched the ORH level for a reversal, but price acted "textbook bullish" by breaking that level, pulling back to test it as support (resistance becomes support), and rallying off of it. I closed my position at $31 (there is the whole number again).



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Back to work

Posted by Tom C.

It was a nice four day weekend, but now I am back at it. Here are the charts from last week's post - scroll down to read the details on entry and exit.





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A few trades

Posted by Tom C.

I wanted to post some charts this morning, but my software is down. JCI was a good "u-turn" setup yesterday. Looking at my trade log, I entered on a break of the 6th bar high. If you plot Fibonacci lines over the opening range of the morning, you will see this setup occurred just above the 50% level of the morning's high to low. JCI provided another great example of price stalling out at a whole number ($30), and if I remember correctly it printed several bars at that level giving you a great signal and plenty of chances to close a profitable position.

I have not had many shorts this week, but noted CSIQ was a great setup; my broker did not have shares to borrow but it is still a good chart to study - similar to one posted in the comments of Friday's post by a reader. Price gapped down and fell the first 30 minutes and then pulled back into resistance before turning back down. I was looking to enter on a break of the 13th bar low, but again my broker did not have shares to borrow.

I will try to post charts when my software is up and running.

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More trading blogs

Posted by Tom C.

I like to read Pradeep's blog, StockBee. Every morning, he has been posting "stocks likely to break out today". Yesterday SEED exploded at the end of the day (I had no position).

Check it out - it is probably a good basis to start your morning watchlist.

And Wall St. Warrior still puts up great content day after day - after all of these years, it is probably the most consistent blog with quality information out there.

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Friday trades

Posted by Tom C.

I am kicking myself for missing a trade in WFT, but I had a nice one in CMI. Take a look at the chart and see if you can figure out where. I am done for the week - I will try to continue this crazy blogging spree I have started next week!

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LEN - 010710

Posted by Tom C.

Yesterday, LEN did a "u-turn" and rallied - almost - to the FE. What stopped it? A whole number, as I have pounded on for a few months now. It stalled out at $16, and I closed my position on a break of the 2:40 bar's low (marked with the top arrow).

My entry was a little riskier. I can make an argument I entered on a "hammer-type" candle, but I hate hammers that close red. What made me bullish was price finding support above the RZ and on a rising 8EMA. The 4-8 bars made a nice bottom, and I entered on a break of the 8th bar's high.

Fibonacci lines were plotted in traditional style - PDL to ORH.



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CERN - 010510

Posted by Tom C.

I am going to try and post a few daytrades every week, and a few longer-term trades every month. We'll see how long I keep it up! I am going to be on vacation most of February, so I hope to start strong in January and pick it back up in March.

My daytrades are somewhat boring, and I usually trade the same handful of setups. I occasionally tweak my MAs and some support/resistance lines (for instance, marking the halfway point between the low and retracement zone (RZ), the high and the RZ, the high and the Fibonacci extension (FE)). I usually trade 10 and 5-minute charts, but sometimes look at and experiment with other timeframes. But for the most part, the setups are consistent.

I traded CERN long today - the Fibonacci lines are plotted over the previous day's low (PDL) to the opening range high (ORH). It gapped up and pulled back to form a version of the "u-turn" setup (though sloppy). I actually entered as price found support at the 8EMA and moved back up through the ORH. My entry was on a break of the 15th bar's high, though there was some good entry points prior to that. Since price had already closed above the ORH and pulled back below it, I was bullish on the move back above and felt confident it would run to the FE. Price rallied from my entry and hit the FE a few hours later. Because price action was strong, I actually held for $88.00 and closed the position at that level (see my previous post about watching the "whole dollar" levels). CERN continued to rally, but I was happy with my piece of the action.



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Happy New Year!

Posted by Tom C.

I am starting off 2010 on a positive note, by reading through submissions on "Five Rules For Life". If you have time to kill in the next few days, it is a site worth exploring. And not just because myself, Trader-X, Dr. Brett Steenbarger, and other traders contributed - but because there are some good rules to think about and reflect on as you are planning out your new year (and new decade!).

Here are some good links, or just hit the home page and start reading through them all from the top:

My rules
Trader-X
Dr. Brett Steenbarger
Baron from ET
Compilation Post #1
Compliation Post #2

Have a safe and happy beginning to the new year!

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2010 is coming...

Posted by Tom C.

It seems I get more requests for my longer term trades than my daytrades. To be sure, the majority of people come to the blog to see X's daytrading...but the people who email want to see some swing-trade examples!

AAPL is a trade I initiated earlier this year, and it has done quite well. I am holding it into 2010 but will [most likely] sell on the first weekly bearish candle setup.

AAPL turned bullish (in my mind) at the end of May when it crossed the 50% level of the previous year's high to low; for the next five weeks it tested that 50% level as support. Price formed a hammer on top of that level at the beginning of July, and I entered on a break of the hammer (indicated by the black arrow). As I stated earlier, I am holding the position into 2010 and will plot my new Fibonacci lines over 2009's low to high*. I will watch to see if AAPL makes new highs and moves toward the FE of the new, 2009 Fibonacci lines (my target to close the position), or reverses and pulls back (at which case I will take my profits).



All the best as we wrap up 2009 and head into 2010. May the New Year bring joy, happiness, profitability, and maybe a few more Tom C. posts.

*as always, credit goes to TRADEthemove.com where I learned to frame price in this manner.

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My monthly post?

Posted by Tom C.

I am still toying with the idea of blogging on a more consistent basis - but the cons outweigh the pros. I have until X's return in June to fill space on the blog - maybe 2010 will be more motivational than 2009 when it comes to blogging.

I wanted to revisit the longer-term view of the major indexes. The S&P (I use SPY as a proxy) has been stuck in a range since the end of August, but looks like it is trying to break out as of the last few weeks (the blue line is the 100MA). This week's price closed above the 50% level of the previous year's high/low, so an end of year rally may be in the works.



The Dow (I use DIA as a proxy) also closed above the 50% level this week. Nasdaq (I use QQQQ as a proxy) has fared the best, with price crossing the 50% level in mid-July and rallying 10% to close solidly above the retracement zone (RZ) over the past few months.





Note - I don't trade any of the major indexes, I just look at them weekly because I like to know what is happening in the broader, bigger picture.

2nd note - as always, credit goes to TRADEthemove.com where I learned to frame price in this manner.

On to a longer-term trade I did make this year. GLD opened the year in the RZ, but below the 50% level. Price rallied above that mark in the 3rd week, and I watched for a pullback. At the end of February, price began to pullback and in mid to late-April it bounced off support at the 50% level (previous resistance becomes support). I entered on a break of the 04/12/09 week's high (black arrow), and held until price hit the Fiboancci extension (FE) two weeks ago. I actually added to my position on a trendline (black line) break at the end of August. My best trade of the year, with a 30%+ gain.



I hope everyone has had a great 2009, and I wish everyone all the best in 2010. I will try to make another post or two in December, but no promises.

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How I improved my trading in 2009

Posted by Tom C.

2009 has been a good year for me, but it has been made better by a small tweak I made a few months ago. Many of you may already do this, as it is not a "hidden secret". But I have never incorporated it into my trading on a consistent basis.

What am I talking about?

Watching the whole dollar level (and to a lesser extent the .50 level) for support and resistance. Many times price will move towards my target but stop just shy of it. A few months ago I started plotting a dotted line at the whole dollar level and the .50 level, and a majority of time they are responsible for price turning. I also use these levels as an additional filter for entering trades: if I have two setups that are equal, but one has me entering a stock at $25.89 and one has me entering a stock at $30.10, I will take the latter setup because I realize the higher risk with the former - price could turn at resistance from $26.00.

Simple, yes. And as I said above, many of you may already watch these levels. But if you don't, I highly recommend it.

In regards to my post at the beginning of September on the big picture, not much has changed. Price is still climbing through the retracement zone (RZ), and there is no clear indication on direction for the remainder of 2009.

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