DNDN gapped up on the open and retraced 38% of the move from the previous day low to the ORH. The second bar bounced back but did not take out the ORH. The third bar was narrow on declining volume. As the third bar was taking shape, I noticed that we had a very orderly base and break pattern developing on the 5 minute timeframe. I placed a buy stop order two cents above the high of the base as shown on the chart below. An orderly base usually results in an orderly break and move higher. If you are looking for low risk entries with easy to manage trades, this is the pattern to look for and I've been noticing an abundance of them lately.I took a partial when price retraced back to the 38% extension and I was stopped out on the balance at $21.30.
16 comments:
Nice chart analysis Jamie.
When you enter your stop orders are you using a Stop Limit with an offset +/- a few pennies (limiting how much you are willing to pay with the risk you don't get all of your fill) or are you using a Stop Market order? If you are using a Stop Market order, in your experience on average how many pennies are you paying up above and beyond your Stop price?
Thanks Jamie in advance for your response.
Jamie,
Why is the 6th candle (red) on the 5 minute chart the high of the base? Why not the 5th candle (green)?
Jaime,
Real nice trade. Been noticing the base/break or c/h thing too along with bios(sign of high risk taking, high valuations?)zolt8/15 . Maybe because the market is in the high areas, not like May06 when came off the overbot lows and went nuts.A few questions: 1)do you trade momo stocks like Friday's inap fslr rnwk expe jaso tsra on 15 min charts? They just rally without pause. Or break down to 5 min and see if there is somesort of candle/low risk point? 2) Here's my set up: (Scottrade Elite)I put 25-35 scanned premkt naz gap ups on a watchlist with 2 charts along side it 5/15, then put 4 charts on a page 5, scroll down to the next set of 4 on a page, etc. All done before market. Then scroll up and down the page during the day to observe. I don't like to scroll through my watchlist manually way hard and distracting. I feel I'm watching a movie. I change my charts to 15min after the first 1/2 hr usually, and the watchlist charts to 15/30. I've been catagorizing patterns from 1-6 1 being momo and 7 being failure, dndn would be a 3: momo, bump-n-run, base-break, fib OR, fib below OR, flat, failure.
Traded 7/30 for lunch$. That's it. Any suggestions? Thanks,
BL
Hi Jamie,
Do you size each trade on a set amount you are willing to lose on a trade, or do you vary the $ amount you risk based on the type of trade (i.e. B&B, reversal, etc....).
Thanks,
ADD Trader
"then put 4 charts on a page 5"
should read
"then put 4-5min charts on a page"
boy, must be that wine of last night that's providing the fun here
Edit:
patterns from 1-7 1 being momo and 7 being failure, dndn would be a 3: momo, bump-n-run, base-break, fib in OR, fib below OR, flat, failure.
Traded FSLR 7/30 for lunch$
Thanks JR,
I'm using stop limit orders. With highly liquid stocks - no spread, the fill is usually 1 cent below my limit price. Stocks with higher spreads like GROW have a lot of slippage so I try to use mental stops and sell on the bid when I have to get out. In my experience, the efficiency of the stop is almost entirely relative to the spread between the bid and ask.
Prospectus,
Either one can be used, but the 5th candle lines up with the ORH, and I don't need to drill down to the 5 minute timeframe for that setup. I used the 5th candle because that is where the NRB on the 15 minute starts.
Edit,
I used the 6th candle because that's where the NRB/15 min. starts.
BL,
I put scanned charts into stocks charts 15 min. timeframe and scroll 10 per page. I take the 5-6 best looking charts and key them into Esignal. Every time I click on a symbol in Esignal I get 3 timeframes on one page - 1, 5, and 15, plus the level II. I don't use 30 minute charts.
I used to trade stocks like INAP on a break of the pre-market high if and when the pre-market trading range was narrow (low risk). In this case INAP was not narrow. I let them run until 9:55-10:00 and sell. I have not done this in a long time. Now , I prefer to wait for the market to open and define its range in the first few minutes and trade on the lower timeframe ie. 1 minute. I did this with AMZN on Friday. Long on break of base high set by 2&3/1 min. bars with stop 2 ticks below 3rd bar. Added more when AMZN retested this area as support and bounced again.
I run more scans after 10:00 as some gappers don't trade in pre-market. This sometimes gives me 1 or 2 additional really good high volume setups.
I am exploring the possibilty of trading green hammers off of first 15 bars as these are often momo but so far I've not done it.
I don't limit my trades to gappers. I have a watchlist which often generates more trades than the gappers. Also, many of my watch list stocks gap up. I find the sorting and filtering of gap scans very time consuming and don't bother with it on days when the markets gap wide. On those days, I use Briefing.com and watchlist only.
I have not come up with a system to categorize my setups/trades.
Hi ADD,
I size trades based on $ risk and orderliness. If I have a choppy base, it usually leads to a choppy trade and so I'm willing to risk less. An orderly base like DNDN gets max. $ risk. An orderly pullback/reversal setup with little or no overlapping candlestick bodies gets higher $ risk than a choppy pullback.
Within that framework, I somtimes decide that certain market conditions ie. choppy sessions are not worth much $ risk and I reduce size accordingly. I also do a lot of scaling in and out. For example, I scale in if I'm trading a watch list stock off the open. But gappers are usually traded after 10:15 so usually don't scale in, just out.
There's a lot of feel associated with sizing and that's difficult to articulate.
excellent replies- i trade almost the exact same way. stop giving away the edge.
me
Hi Jamie,
Did you trade AMZN on Friday?
Thanks,
AJ.
Hi AJ,
I did trade AMZN on Friday. I will post the chart this evening.
Thanks Jaime,
What's your cut off volume, ADV, today's for gap plays? X mentioned >1m adv as a way to cull the list. Boy that would mean xing some of Friday's big winners:crox fslr inap zolt. I'd call IMCL a "rocket" or 8 patterns
My cutoff volume is usually 200,000. When I want to cull the list, I move it up to 500,000.
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