From the watch list - MDR trading in blue sky again. My Esignal charts died around midday and for most of the afternoon only showed data from 12:00 noon. I guess the quarterly options expiration was too much for them to handle.
As per the comments below, here is the 5 minute timeframe of the MDR trade which adds much more precision. We can clearly see the C&H formation at the base of the daily pivot high (green line). After breaking out, MDR has a momo vertical move, much higher than the expectation for a C&H pattern. The norm is 100%, but MDR is trading in the daily spot - blue sky zone, so we let it run.
I don't short strong stocks like this one because I'm not good at picking tops and stocks making new highs usually retrace, setting up the next wave. So from experience, I look for a normal retracement which I define as 38%, on declining volume. From there I look for a bullish candlestick reversal or a some higher lows, to firm up my theory of the next leg up.
In the case of MDR we got a bullish hammer at the cusp of the 38% fib. retracement level. This coincided with a consolidation zone from the morning rally, so I entered on the next candle as price took out the hammer high.
13 comments:
Hi Jamie,
Would you have traded NKE after the 1:15 hanging man at the 32.8% Fibb retracement drawn from the opening high to the low of the 11:00 candle?
Thanks.
Hi Jonathan,
I was watching NKE and expecting a bounce after the gap fill. However, volume was light and trading was choppy so I passed and moved on to something else.
I also lost the morning data from esignal.
Good eye. That is a nice setup, but I would of waited until price crossed below $59.00. Just looking at the 5 minute and I see convergence of MA's at that point. And shortly after it takes a dive.
jamie:
nice stuff.
besides looking at MAs, PPs, candle formations, do you also look at momentum indicator for INTRADAY like RSI (7) or slow stochosatic...or do you think for 5/10/15 min time frame, they are useless.
thx
gurlate
Gurlate,
I don't use any of those indicators on my intraday charts for trading purposes, but I do find them useful EOD for analyzing possible turns near tops and bottoms. Looking for negative/positive divergence using RSI and MACD, momentum using ADX, and overbought/oversold with stochastics.
Jamie, where did you enter on the second entry? at the break of the bar, at the break of the 38%, or in the middle of the bar?
PN,
Getting back in at 38% retracement is tricky. Using 5 min. timeframe I saw a hammer reversal bar in the area of support where price had consolidated on the way up so I entered long above hammer around $54.25. I always look for conjestion areas to confirm a possible areas of support/resistance. Not sure this is visible on the longer 15 min. timeframe. Also, if you look at 5 min. the original entry was a cup& handle. Again, this is not clear on the 15 min. timeframe. That's why I recommend looking at both 5 and 15 to confirm the setup.
The 38% retracement setup is a strategy I use for strong stocks. The retracement would have to take place on lower volume than the momo move up otherwise it's probably a reversal. The MDR trade met all of the criteria for a bounce after 38% retracement.
PN,
When Esiganl comes back on line with yesterday's intraday data, I will post the 5 min. MDR chart to explain the above comment.
Beautiful analysis as always!. Rudy
Thanks Rudy
LMT looks like a base on base with handle. pivot point $103.60
Thanks CD,
I'll add LMT to my watch list.
Hi Jamie,
I noticed for your re-entry, you didn't wait for the 5 min bar to close to confirm its resumption; also didn't wait for it to recapture the 5EMA. Can you give us some factors which you take into consideration? Thank you.
Nat
Nat,
With a hammer bar at the end of a decline, I usually don't wait for confirmation. According to Steve Nison, no confirmation is required. An inverted hammer needs confirmation, but a regular hammer does not.
If a hammer or morning star or tweezer bottom prints at the 38% retracement level in an area of earlier consolidation, I don't wait for confirmation.
I did a similar trade this afternoon with GRMN using the 15 minute timeframe.
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