Base and break of the OR high on an uptick in volume. I took a partial at the 38% Fibonacci extension level and sold the balance as price approached the 50% level. There were so many gappers in pre-market this morning that I couldn't put together an intelligent list, so I decided to focus on names I knew well that were very active in pre-market ie. showed up multiple times on the Trade_Ideas pre-market scanner.N.B. I think this is a typical Trader-X setup. I won't be surprised if he also took this trade.
14 comments:
I was almost a 100% certain that you would find AAPL today.
I saw it but unfortunately I did not have AAPL on my focus list. I was waiting for FSLR to hit my pivot point support at $56.00 and I bought that instead.
I read your post. Nice job with all the different timeframes. I noticed that AAPL did in fact capitulate at 10:25 on the five minute chart (big volume spike) which took out all the stops.
As you noted there were two great setups on AAPL today: A capitulation play, and a dummy entry on the break of the OR high. I could kick myself. :)
Hi Jamie,
I had GROW on my initial list, but took it off becuase the spread was so big. Any trick to trading those types of stocks. I find I have to give them larger stops because they move around more.
ADD Trader
Hi ADD,
Because the spread is so wide, you have to use a mental stop. If you use a real stop and it gets hit, you lose a good portion of your profit.
Ideally, you want to try to buy when the spread is narrow (less than 10 cents is narrow for GROW) and sell into strength.
Jamie,
Kick me as well while you're at it. I do have one question though. Where would you have gone long? would there have to be confirmation and what would that be?
After the last Wide bar down on the 15, the volume was downtrending though the stock was on the rise. This kinda got me scared and I was not sure if there was going to be another leg down. I'm still studying the pattern and don't know all the finer points needed to pull it off consistently and with courage. BHP similar. If you do get a moment could you share a capitulation trade one of these days?
Thanks,
LP
BHP came right back to its base and formed a tweezer bottom on th 15 minute chart on support of the rising 20 ema, so you could have safely gone long on the 9th stick.
AAPL was trickier because it fell through its base. In situations like AAPL, I usually wait for a higher low . However, you can't really do this on the 15 min. Therefore I recommend either 5, 3, or 1 minute. Works with a V bottom but not all capitulations form V bottoms. Use small size until you get comfortable with it.
I will try and do a post on euphoria and capitulation this weekend.
Jamie,
What is pulling you back from trading the few narrow range candles (7th-10th) thats supported by 5 EMA other than it being below opening range?
Ted
Hi Ted,
A few reasons but mainly:
1. the market was not condusive to successful bullish breakouts yesterday.
2. GROW was extended after several up days.
3. I was looking for a pivot point break set on Jan 5th (support) and Jan. 18th (resistance), so my alert was set at $53.18 which was tested and failed earlier in the day.
I don't like to enter a trade before the breakout point is hit unless it is far away and then I can take a partial or full profit if the setup fails. In the instance you mention, price was relatively close to the breakout target and a failure would likely have resulted in a loss given the wide spread (average 20 cents). Also, the time of day which was close to lunch led me to believe that GROW could trade in the dead zone for an extended period of time.
Jamie,
Thank you for the explanation. However, you have given me more work to now. I was hoping to get out of this the lazy way. Now I have to study V bottoms. I might as well learn U and W bottoms. I seen quite a few U in capitulation type scenarios and I the S&P just recently formed a W. These are intriguing patterns.
I will take you advice and go slow. For now I'm practicing on paper. Also, Thank you so much for taking the time out to explain these tricky situations.
LP
Welcome LP
Thanks Jamie, now I see you consider quite a number of factors before deciding to enter (or not) a trade.
You talked about lunch time dead zone. Do you usually avoid initiating new trades during lunch time?
And for day trades, is there a higher probability if we trade with the trend of the day?
Thanks
Ted
Hi Ted,
I don't always avoid trades during lunch time. As a general observation, I find on days when the morning was dull and narrow range, some stocks start to move during lunch and if this happens, I will take the entry. However, this is the exception.
Yes, I believe that sticking with the trend will result in more opportunities and greater probability of success. However, there are exceptions and a story stock can have momentum that is contrary to the trend.
Are you trading the gaps or are you scanning for unusual volume or both?
Hi Jamie,
Thanks. I usually look for gaps with relatively high volume.
Ted
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