Tuesday, December 05, 2006

Trade of the Day - Guess?, Inc. (Public, NYSE:GES)

One winner and two failures. I had a lot of trouble with the internet at work today. Scans were definitely too taxing so I had to stick with my usual suspects.


GES was an NR7 setup after two inside days. It opened weak and tested yesterday's low on the OR bar. The second bar was NR, and the third and fourth bars lifted price back up to resistance on increasing volume. My entry was a break of resistance with a stop just below the fourth bar. The NR7 setup worked beautifully - notice the price and volume expansion on the break. I knew this couldn't last for very long so I tightened my stop and was stopped out at $64.75.


Keep this one on your watch list for tomorrow as it is on the cusp of a breakout on the daily timeframe below.




RMBS was another potential NR7 - long off of a hammer reversal, but it failed and I was stopped out for a small profit.



SNDK was strong gapper on the open and I took a long entry on the first consolidation, but it also failed and I decided to exit before I was stopped out.



What is NR7? NR7 is the narrowest bar over the last seven trading days. Based on volatility, it foreshadows a potential explosive move through price and volume expansion. I came to learn about NR7 from Trader Mike through this very enlightning post. I look for NR7s on both the daily and intraday timeframes and it has been extremely useful in spotting momo moves. Thanks Mike! Also check out this post by Alan Farley on coiled springs (NR7).

15 comments:

Anonymous said...

Jamie, how do you scan for NR7 on a daily chart? Thanks

Zen

Anonymous said...

How do you determine your stop at 64.75?

Jamie said...

Hi Zen,

Trade-Ideas has an NR7 scan. I also keep an eye on watchlist stocks that are consolidating a big move.

Jamie said...

If you look at the daily chart, you'll notice that $64.75 - $65.00 is a resistance zone. But even so, from the morning lows to highs, the move was so huge and the angle so steep, you had to know that it couldn't go much higher. The other factors to consider in a trade like this are liquidity and spread.

NoGreedNoFear said...

GES : nice trade. Is this a setup you trade often ?

SNDK : good job on exiting early on that one.

I'm seriously thinking about changing my market scanner. I'm currently using ProphetNet and it has been very unreliable lately.

Jamie said...

Hi NoGreedNoFear,

I just recently started experimenting with NR7. I read the post on Trader Mike's blog in October and then I dusted off my Farley book. I actually prefer NR7 followed by a gap up, but I seem to do well with these weak open reversals. Check out my RMBS trade on black Friday - Nov. 24th.

I've never used the prohet scanner so I can't compare. Trade-Ideas is very powerful. I don't use it to its full potential, but even so, I've had some great trades with it.

Paul said...

Thanks Jamie:

1st for being here

next - got a nice hit on GES
very scary trading - moves around
alot. Kept moving my stop first
lower (not more than 1%) and then
upward and tighter (more than several times)

Jamie said...

Hi Paul,

Thanks, Exactly, that's what I meant when I mentioned liquidity and spread concerns in an earlier comment.

NoGreedNoFear said...

Jamie - that other trade was a nice one also. I will checkout Mike's post on NR7s.

Thanks.

Jamie said...

NoGreedNoFear,

Check out MNST today. This was an NR7 that did not show up on my scan. All I can say is WOW! I took the MRVL long instead.

Anonymous said...

Jamie,
Other than NR7, does the scan looks at other criteria e.g. decreasing volume etc before it spits out the NR7 candidates? Thanks

Zen

Jamie said...

Hi Zen,

I'm not sure about the decreasing volume part. And, the scan seems off right now. All the names that came out last night were not NR7. I'm going to try to come up with a scan of my own over the weekend. If I can develop something better I will share it on the blog. And yes, I will incorporate decreasing volume. Thanks for the input.

NoGreedNoFear said...

MNST : a few of those a month and you are on your way to early retirement :)

Noice said...

I'd appreciate on any suggestions on what ook to read on how to scan for set ups, I'm really new at this so really need some help, so thank you in advance, Noice

Jamie said...

Noice,

I'm not familiar with any books on scanning. I would suggest reading the Intro to WSW blog under Key Posts in the side panel for some scanning tips.