Tuesday, April 03, 2007

Dummy Trade of the Day - NutriSystem Inc. (Public, NASDAQ:NTRI)

NTRI did not participate in this morning's rally but did set up a low risk base and break in mid-afternoon. I had originally intended this as scalp trade up to resistance (blue line), but NTRI blew right through resistance and held it as support on a closing basis, so I stayed with it. Sweet!

AL was a narrow trading range, base and break pattern. The narrower the base and the longer the basing period, the more momo the move. I exited my position a little prematurely as price tagged the 62% Fibonacci extension.

12 comments:

OONR7 said...

wow... nice trading.

Jamie said...

Thanks ooNR7,

And likewise with your GROW trade!

Prospectus said...

Jamie,

How do you find your base-and-break candidates? Are you just manually monitoring your usual suspects watchlist?

I saw so many stocks trade sideways at the day's high for hours today, and I didn't think that any of them would move more than they had since the big indicies were stalled out. I bow to your trading prowess!

Is a 62% fib your standard profit target for a base and break like this? Or just because the consolidation was so narrow and dragged out?

Bubs said...

Did i ever tell you that your my idol great trading

Jamie said...

Hey Prospectus,

I'd say that 50% of the B&B patterns come from the usual suspects list like NTRI today and the others come from the gapper scans. I also pay special attention to analyst upgrades/downgrades of my watch list stocks. That's how I found the CEPH setup yesterday.

62% is not really my usual target, however, under current market conditions, I'm very happy with 50-62%. Normally, in an uptrending market, I like to hold on to the mid-afternoon trades up until the close if possible. But lately, I keep getting stopped out.

Jamie said...

Thanks Bubs,

Today was a good day, unlike the past week or so when it was difficult finding good setups.

Anonymous said...

Jamie,
I'm learning to adjust my stops better, so hope you don't mind going through how you managed the stop for NTRI. Was it similar to CEPH?

Btw I saw 2 stocks with tweezer bottoms on 15 min chart:

GS-2&3 bar
AAPL - 3,4 bar (in fact 5th bar too!)

In your opinion, any low risk entry for these 2 stocks and how would you have traded them?

Thanks,
Pat

Jamie said...

Pat,

My initial stop on NTRI was the previous bar low. I next moved the stop up to $53.50 but only after it had taken out $53.75 on the third last bar. When the second last bar stalled just under $54.40, I tightened the stop to $54.25 and I was stopped out.

I see the tweezer bottoms you are refering to for both GS and AAPL. Both of them occured in strong support areas so they were relatively safe to trade, however, they were WRBs so you would have to move to a lower timeframe in order to pinpoint a more favorable risk:reward ratio. AAPL above $94.50 around 10:40 and GS above $207 around 10:10 with good support of the rising 10 period EMA on both.

OONR7 said...

jamie... need your expert commentary on JDSA. The 11th bar formed a nice nr3/nr7 combo. That was my signal. I was looking for a nice NR bar to form above the OR right after, but didn't. However, there's two things or two entries I noticed when reviewing this chart.
1) There looks to be a nice base forming from bars 4-11. A break of that base, even below the OR, might have been a good entry. What do you think? How effective is this kind of base pattern when it's below the OR?
2) Bar 14 forms a perfect inside doji with higher lows and lower highs... it looks like either a break of this candle or the high of the 11th would have been a good entry. Obviously, I know the stock ran up, but have you observed this kind of pattern in the past to be particularly effective?
Thanks, as usual, for your input.

Jamie said...

Hi ooNR7,

I was also looking at JSDA yesterday but did not trade the first base break that you mention above $23.25 and 15 cents below the OR high.

Two reasons: 1. Too close to lunch time when stocks often trade in the dead zone. and 2. My observation with this type of basing pattern just below the OR high is that they sometimes fail on the first attempt and then pullback a little before a second attempt in mid-afternoon.

So rather than having to manage a trade for an extended period of time, I prefer to wait for the actual break of the OR high.

If the distance between the base and the OR high had been a little wider, I would have considered an entry with a partial on the retest of the OR high.

Your second point regarding the two inside bars 13 and 14 is perfect. The inside bars are usually very good indication that contraction will lead to expansion. This was the entry with the highest probability of a quick return. I'm sorry I missed it.

OONR7 said...

thanks for your clear and concise explanation (as usual). Have a good trading day.

Jamie said...

Welcome ooNR7,

As I'm writing this I just noticed that my KLAC buy stop order on a base and break off of a NR7 inside bar just executed on the 11th 15 min. bar. Nice volume on the break. We'll see if it delivers a winner!

Good Trading