AMLN gapped down on the open and carved out a WRB with a small lower shadow. Price consolidated sideways in a very narrow range in the lower third of the OR. On the eighth bar, price and the down sloping 5 period EMA converged. The next bar broke the narrow consolidation range and set up a low risk, dummy short on a sell stop order. Shortly thereafter, AMLN started trading sideways again (lunch time doldrums). When it finally, broke below the ORL, price fell nicely into the daily pivot for a partial. Tighten stop to the previous red bar high at the PP as pivots sometimes result in a reversal. After a minor bounce from the daily pivot, it continued its trek lower.The daily timeframe below shows how I mapped out the daily pivot low. Also notice how the 25% Fibonacci extension lines up perfectly with the daily pivot low.
10 comments:
Jamie,
Right before you entered this trade, were you concern that the Opening Range Low (ORL) might act as the Support, and prevent the prices from falling further?
Although your entry, as you stated, was a low-risk entry, I'm trying to understand how you saw the ORL in this setup, especially at the moment right before you entered the trade.
A lot of times when I come across setup similar this one, I get discouraged because I was not sure if the ORL will play tricks on me. Therefore, I'm trying to understand your point of view in regards to the ORL.
Thanks in advance!
Closetdaytrader,
This is always a concern for me as well. I also worry that if I don't take the low risk entry close to the 5 period EMA, I will have a higher risk setup come into play on the actual break of the ORL. Or, as sometimes happens, the break takes place when I'm away from my desk.
When I take the entry as I did today prior to the break, I don't move my original stop until after price has safely cleared the ORL. This usually works for me, however, the long waiting period ie. the deadzone of sideways action can be a real nuisance too.
After analysing this trade, I realized I might have waited until the 50 MA on the 5 minute timeframe came in closer to price. I've made a note to review the 5 minute in more detail on the next similar setup.
Jamie,
Great post as always. I know you had written about AMLN last week I believe. What alerted you to it today? Was it one of your saved charts with an alert on it or did it just pop up on a gap filter? I played AMLN last week when it tried to break its May 22nd high, only to get yoked. Thanks for the info.
Hi Jamie,
The last few days have been very good for me.
Following some comments you made earlier, I have been experimenting with Stockcharts.com and the end-of-day scans have so far proved very encouraging.
For instance, today I had picked out CLWR, XL, KSS, CAH, BHI and XOM as possible movers from daily charts. Out of those 6, BHI and XL provided excellent returns.
Your own analysis has also helped me enormously. Thank you.
Missed AMLN completely, even though it was on my watchlist!
Happy trading!
Clive J
Jamie,
Thanks for taking the time to share your thoughts!
Great Blog! I'm a daily student of your Blog.
Thanks Alex,
Actually, it was Clive J who mentioned AMLN as a flag candidate over a week ago. I added it the watch list and traded it Friday and again yesterday.
Clive J
Happy to hear that the stockcharts.com scans are working for you. I have also had some big winners these last few days despite the NR market. BHI was on my watch list as well, but I did not get to it in time. Nice work!
Closetdaytrader,
Thanks for the kind word.
Hi Jamie,
No time for EOD-scanning before the open today, so I was relying on my Usual Suspects list for opening plays. CMI was fine $95.00 upwards on the 1min chart but I got in a bit of a mess with JOYG. I made just 22 cents out of a $2.00+ move!
If you traded JOYG, your thoughts would be most welcome.
Happy trading!
Clive J
Hi Clive,
No I missed JOYG as I was busy with AMZN and CROX.
JOYG hit a PP dating back to March 2006 and that maybe the reason for the reversal. Initially, it is hard to tell if a stock is retracing or reversing because often times volume doesn't really kick in until after you've given back too much profit.
I closed my CROX position when it couldn't hang on to $85.00 on the second try and now it looks to be trying again. I just got stopped out of my partial on AMZN at $73.75.
The markets are retracing today so we are trading against the market with these longs.
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