Wednesday, January 24, 2007

Dummy Trade of the Day - Continental Airlines, Inc. (Public, NYSE:CAL)

The chart above is a 10 minute chart of CAL which gapped lower for the second straight day. Today's long lower shadow on the OR bar hinted of a gap fade and that's why I was quick to change over to the shorter timeframe. I took a low risk long entry as the third 10 minute bar opened. My target was the area between yesterday's low and close. My target was reached shortly after 11:00.

My next trade with CAL was short, which setup perfectly on the 15 minute timeframe below. Around noon, CAL carved out a gravestone doji reversal stick on the resistance line. The following bar was a spinning top and when the next bar took out the 10 period MA, I went short and covered as price hovered on the $43.00 mark for and extended period.


jrj said...

Did you trade GROW today?

Bubs said...

Great trade. I really have to finish reading my Candlestick book so I can get a better feel of these trades.

Jamie said...

Yes, I traded GROW long on the third 15 minute bar as it took out the second bar. It eventually went up above $46.00 so I moved my stop up to $45.59 and I was stopped out with lots of slippage. The slippage is so wide it wipes out a good portion of the profit. GROW is the type of stock you have to watch tick by tick to ensure you get out at the best price.

Everytime I get stopped out with more than 10 cents slippage, I swear that I'm finished with this stock. But, I usually change my mind on the next breakout.

It has carved out a nice rounded base and is well positioned to go to $50.00

Jamie said...

Thanks Bubs.

The most important chapters in the candlestick book are the reversal patterns and the doji sticks. Master the main reversal patterns and you'll be all set.

Anonymous said...

Hi Jamie,

Again, great setups, great commentary!

Question for you - how do you discern between a good OR breakout (15 min OR) versus a bad one. I have been frustrated by multiple setups where getting in is marginally profitable to break even. Nothing near the 2-3% trades you do!!

I look up stocks that have gapped up to go long...


Jamie said...

Hi Sid,

My primary condition for a good gapper long is volume. I like to see 2-3 times the level of volume of the preceding days. Then I like to see some sort of consolidation of the opening gap - sideways trading is good. I often look at the 5 minute chart to see if price is consolidating on declining volume. And then I like to enter just as volume starts to pick up again. I don't like gaps that are too wide. If the gap is very wide, I wait until the rising 10 period MA catches up to price.

Another important factor is resistance. If the stock gaps up into a resistance area, I don't take the trade.

Good trading!