CSCO was a fairly straight forward gapper dummy setup - Trader-X style. You could have also entered on the retracement of the morning swing high. CSCO tagged $31.50 then retraced 62% of the move from the early swing low to the base and carved out a red hammer which closed above the up sloping 5 period ema.In mid afternoon the markets succumbed to some serious profit taking and CSCO did not reach its full 38% Fibonacci extension of the previous day low to the base ($31.50).
My other gapper trade was a little more problematic, but you'd never guess looking at the perfect three bar ascending base from which I took my entry. The first chart is the 15 min. timeframe and second is the daily.
I took a dummy gapper long on a break of the ORH. Things started out very nicely but then the BO bar closed with a long upper shadow. A quick look at the daily to see if I had missed something. I was aware of the PP (blue line) because it was behind me already. I had looked at the daily too quickly and I had missed the bearish gap resistance (area between red lines).
Price was having difficulty extending because of the gap resistance. I started scaling out at $56.30 and moved my stop on the balance to $56.00.
N.B. Volume was so high today that my IB platform couldn't keep up with the correct bid and ask. My Esignal level II also went crazy during peak volume. It's a little scary when the platform tells a different story than the charts.
4 comments:
Jamie,
I don't have time to look at all the spt and rst levels but I can see how it can help. Maybe we should go after 52 wk highs and forget about resistance. I noticed with big market gain days it almost doesn't matter about gap plays, and even many of the shorts reversed. Seems like the gappers don't move much while the others play catch up. Do you find it "easier" to trade $20-35 stocks than $>40? SPWR was a ride if you caught it. Traded HANS 4/15" for a small gain, TRID be, PCLN small gain.
Many times, my chart is a delay of the level 2. Now I know it is not my software or hardware problem.
Jamie, about 2 weeks ago, I would only find a couple gappers that became a fade gap trade. But during the last week or so, there are many gap fade.
Is this normal for this bear period, have your seem anything like this from your years of experience?
BL,
Understand your point re: S/R. I just wanted to show that scoping out S/R lines might save time managing a bad trade. Lost time spent managing SGR means missed trades.
Agreed, my best trades today were the lower priced stocks - retracement entry with HOKU and B&B on a gap fade with CREE.
SPWR was sweet, but I missed it.
Today was institutional money at work. Happens one or two times a month. Those really high volume days are better played through sector strength, in other words follow the big money. Gappers don't give you an edge on these types of days.
Jerry,
High volume days like today can cause problems with trading platforms, We've had several high volume days in the past few weeks.
Good observation. I noticed more gap fades as well. I guess it's due to high volatility from the recent widening trading range caused by the correction.
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