Friday, February 23, 2007

Dummy Trade of the Day - Ultra Clean Holdings, Inc. (Public, NASDAQ:UCTT)

UCTT gapped up on the open and rallied and pulled back to it base. With the exception of stick #5, it held the OR high as support on a closing basis. As price consolidated just above the rising 10 period EMA, UCTT printed a NRB at the base of resistance. I entered a low risk dummy long on a break of the NRB. My preliminary target was the thick blue line which represents resistance on the daily timeframe. I took a partial at the 62% Fibonacci extension (yesterday's low to the OR high) which was just 10 cents below the target because I didn't want to miss the exist over 10 cents. Price eventually hit the target and immediately pulled back to the rising 10 period EMA. Since I had already taken a partial, I stayed in the trade and price eventually rose above resistance. I exited the balance into the close.


The Addict said...

great trade, and a great find on a slow day.

OONR7 said...

nice trade Jamie. I took it on the :30 (break of 5th bar high). I liked the formation on the :15 (especially the NR7 on the 10th bar), but since it had already touched the fib. ext. earlier I decided to pass on the :15. What's your experience with stocks that hit their fib ext and retrace to base? More risky? Less risky? Just as risky? Thanks.

Jamie said...

Thanks guys,

The last two days have been very choppy and good setups are hard to find.

@00NR7 - I read your post and agree that the setup is much cleaner and orderly on the 30 minute timeframe vs. the 15. The most compelling aspect of this trade for me was the volume. It was running more than 4 times the daily average and looking at the daily timeframe, I felt that all that buying was moving towards a test of its all time high. I also liked the orderly pullback to the base of the OR high which tied in nicely with the support of the rising MA. As UCTT based between 10:45 and 11:45, price narrowed with a series of higher lows and lower highs which felt like a mini triangle pattern. The NR7 candle just prior to my entry was the icing on the cake and made the setup all that more compelling.

I use Fibonacci as an aid for entry and exit points, but my main focus is support and resistance. In the case of UCTT, it gapped up and made a run for resistance on the open, tagged the 38% Fib. extension and pulled back to catch its breath. After consolidating in a narrow range, it regained its energy and made a second sprint towards the finish line and ultimately achieved the target, and even surpassed it into the close.

Generally speaking, if a stock tags the Fibonacci extension and stops, I need to see a consolidation of price or time or both in order to contemplate an entry. UCTT consolidated both price and time. Also, proximity to the support of the rising MA and the angle of the MA are major factors to consider. For example, if the MA's angle starts to flatten, it sometimes signals that the stock is tired.

OONR7 said...

thanks and great explanation Jamie. It certainly did consolidate... bars 7-10 formed three NR7 bars. Pretty powerful stuff.

I just checked the daily chart and saw the all time high just sitting there. I need to keep this post in mind when I see a similar setup. While I liked the :30 setup that I took, I prefer the NR7 setup on the :15 above the OR and right on the 5ema. Thanks again.

Anonymous said...

On UCTT it looks like bullish enthusiasm 1st 3 bars, profit taking next 2 bars then some short covering combined with new buying rest of day. Nice guess on the dir. keep it up.

Jamie said...

You're welcome OONR7.

Thanks Anon.