Monday, April 02, 2007

Dummy Trade of the Day - Cephalon, Inc. (Public, NASDAQ:CEPH)

There were not a lot of good dummy trading setups today. CEPH gapped up on a Jeffries upgrade and setup a base and break pattern in early afternoon. It was slow at first but around 3:00 volume picked up and it looked like it might rally into the close. Unfortunately, the 38% Fibonacci extension proved to be too much resistance and I was stopped out as it was about to roll over.

P.S. - Tom C. over at Trader-X also traded CEPH.


nnasdaqqq said...

Lets say a stock breaks the OR high and then pulls back below the OR high, leaving an upper wick above that high. Later on it retests that same high, do you enter on the break of the morning OR high or do you now look for it to break the high of the the wick that penetrated the OR high previously (i.e. todays CEPH on the 6th & 12th bar).

Prospectus said...

nnasdaqqq: I don't know about Jamie, but I enter only after a candle closes above the OR high, and preferably strongly. In Jamie's chart, there was an entry on a break of the 13:00 candle high, and the one I took in the 13:30 candle as it broke the 13:15 dummy candle high (also labeled by Jamie as his base and break blue line). Neither the 6th or the 12th were a valid entry to me. I ignore the previous wicks as there is often a false start or two before the main move to draw in the newbies (Me, a few months ago)

Jamie: I think you and Tom both owe me McDonalds ;)

In lieu of food I accept MCD Stock.

Oh, and as others said over at X's--just knowing I traded the same stock as the pros out there makes me feel that there is hope for me :)

Jamie said...

Every setup is unique but on these types of base and break patterns - CEPH today and GROW last Monday, I wait for price to break the high as opposed to the OR high. So to answer your question precisely, I waited until price exceeded the 6th and 12th bar highs by two ticks before entering the trade. The reason for two ticks is that I want the bid to take out the high of the day and not just some anxious trader to hit the ask.

Congrats Prospectus, I'm waiting for MCD stock to come back into support at $42.50 and we'll see if its a good buy at that level.

Anonymous said...

What was your initial stop? And you trail stop to 38% Fibonacci extension and stopped out right there? Thanks


Jamie said...

Hi Pat,

My initial stop was set about 5 cents below the OR high. I moved my stop to breakeven as priced approached $76 and when it broke above $76, I moved my stop to the low of the previous 15 minute bar and so on until we reached the 38% extension. I then flipped to the 1 and 5 minute timeframe to monitor the price more closely. Just before 3:30, CEPH carved out a small doji on the 5 minute and I tightened my stop to that level and I was immediately taken out.