Monday, February 26, 2007

Dummy Trade of the Day - Force Protection, Inc. (Public, NASDAQ:FRPT)

FRPT gapped down on the open and fell hard. Midday it consolidated sideways until the declining 10 period EMA caught up to price. Just before taking another dive, it conveniently carved out an NR7 stick. Short on a break of the narrow trading range. I took a partial at $17.00 as I noted it was a support area on the daily timeframe and I covered the balance into the close.

Victoria also traded FRPT on the 10 minute timeframe allowing for a more aggressive entry than mine.

UCTT was Friday's dummy trade of the day. Today it gapped up slightly and immediately pulled back with the market. It found support near the 10 period ema and attempted to rally. I decided to take a low risk dummy entry after the NR7 bar because I felt it could rally back up to its OR (opening range) high. Notice that the NR7 bar has virtually no volume and these generally are very effective in predicting price expansion. I closed my entire position as soon as it tagged the target.

THE gapped up on the open and rallied nicely. After an orderly midday swoon, price stabilized on the 10 period EMA. I took a low risk entry, hoping for a retracement back to the morning resistance level (blue line) and exited the entire position when the target was met.


Anonymous said...

When you shorted FRPT, did you use a limit order or a market?

Jamie said...

Limit orders. I rarely use market orders.

Zoomie said...

Wow. I rarely use limit orders. I do at tines when I short though. I very rarely get bad fills. Did the tweezer bottom on the THE trade factor in as well? The

Jamie said...

Hey Zoomie,

The last time I used a market order was AAPL on the open last Wednesday.

I often use a stop limit order and this goes back to my breakout trading. When a stock is basing and about to break, I want to make sure that my stop limit order is two pennies above the high of the base to avoid a false breakout. Sometimes, someone will hit the ask but the bid never gets above the breakout level, causing a false break. My two cent stop limt order saves me from entering a false breakout. Of course this tactic only works with highly liquid NASDAQ stocks with no spread.

Good eye Zoomie. I didn't mention the tweezer bottom on the THE because I wasn't sure it met Steve Nison's criteria and I was too lazy to look it up at the time that I wrote the post. But now that you mention it, he says that the ideal tweezer bottom has a wider body on the first candle and a smaller one on the second. I thought that the second candle had to be more bullish. So you're right, the tweezer bottom was helpful!