I was interested to see if we would get some follow through on the FMCN PP break from the previous day. From the daily chart above, we see that the PP break stalled at resistance marked by the red line.FMCN tested the rising 50 period SMA on the open and bounced from there. After taking out the previous day highs, it consolidated, carving out two inside bars on declining volume. The only caveat was the long upper shadows on bars 3 and 4. However, bar 5 (2nd inside bar) closed strong, just edging above R1 (pale blue line). I took a dummy long on break of second inside bar. My target was R2 and it was met on the second bar. Since this is the second day of the move and the markets were down, I determined that R2 was probably the maximum attainable target under the circumstances, so I closed the entire position as price approached that level.
Two inside bars on declining volume works well on the 5 minute timeframe as well. A good example is CROX late in yesterday's session.
I ran a scan to find similar setups on the daily timeframe. The scan generated about 20 names. The best ones are ARBA, COG, FMD, NDAQ - long, and DSX short. I'll be adding these to my WL for the beginning of next week to see if anything pans out.
Related Posts: Dummy Trading Tip - Two Inside Bars
6 comments:
I use something totally different to you for screening and FMCN, ARBA, and NDAQ are on my list as well. I actually bought NDAQ, but would buy the other two just the same as well.
We'll see this week if FMCN is overbought near term. I would be a dip buyer on it though.
On a swing term basis the FMCN pattern should extend back up to $51-52. But I would like to see consolidate along the way.
Jamie, do you use other indicators such as Index Futures as an entry or exit signal?
PN, I watch the index futures to get a better feel for the market, but not to plan entry and exits. Once a stock breaks a PP it usually moves on its own volition.
jamie:
would you buy this long if say the 50 period MA was declining..as well as the 10 & 5 period MA were above the stock price?
Gurlate,
Good question, I would not buy long if price was below 5 and 20. In the example above we have a pause in an uptrend so price is above the 50. In the case of a reversal from a downtrend, I would still wait for price to break above 5 and 20, however, it could likely still be below the 50 and still be a viable entry as long as the 5 has crossed over and above the 20, signaling a bullish trend reversal is taking place.
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