A reader asks the best way to trade SSTR.SSTR was a flat base breakout gapper on the daily chart. The first bar is bullish on very high volume. Price then consolidates the wide gap open. An early attempt to break the ORH fails and price eases back into the rising 5 period ema on declining volume. The fifth bar is a bullish green hammer reversal bar (NR7) in close proximity to 5 ema. This is the trigger bar for price expansion. There are several ways to enter: 1. break of hammer high; 2. Break of round $ number; or 3. Break of ORH. If you wait for the break of the ORH, you have to give price room to retest the base of the ORH.
A reader asks what went wrong with this JRJC trade using the 5 min. timeframe.
Click on the chart to read my notes. Here again I would emphasize the need to allow for a retest of the base set by the ORH immediately following the breakout.
A reader asks if ANW meets the criteria for a 38% retracement.
Due to lack of specifics, I'm assuming the reader wants to know if this qualifies after the first swing high. I normally use the 38% retracement after a stock has rallied out of a base. In this case ANW rallies off of the OR and swings back down. Volume is choppy, however after retracing 50%, it slowly moves above the 38% retracement level and carves out two NR7 bars which could be used as a low risk entry point.
He also mentions JSDA. All I can say about JDSA is that it gapped after two previous MOMO days, and the third day usually loses momentum, so I don't recommend trading a stock that gaps after such big gains. I know that the Chinese plays are defying gravity at the moment but trading rules are not based on exceptions, they are based on everyday trading reality. So in this case, I would pass as per my trading rules.
How do I develop my watch list?
I did a post on that which you can find in the Intro to WSW Blog. I've also recently started scanning for inside bars on declining volume on the daily charts. I'm looking for inside bars on an established trend which implies a pause before the next leg or wave.
Reader participation - Check the comments section of the Focus and Watch List posts as many readers contribute some awesome setups.
If you are a new trader and you need a watch list, you can use the Focus Lists on this blog. However, I don't update every night due to blogging time constraints. A fresh nightly watch list is available at highchartpatterns.com. I've used the service and highly recommend it for B&B.
19 comments:
jamie... I like this Mailbag feature. Also, I think I'm going to try to subscribe to the 1 month free trial for highchartpatterns. I've heard a lot of people mentioning it, the price seems really reasonable and momo stocks are a nice way to make a lot of profit. Thanks for the mention and I'll be sure to tell them I heard it from you.
Thanks OONR7,
The HCPG service is really nice because the watchlist arrives usually an hour or two after market close, giving lots of time to setup the charts for the next day.
Nice Jamie! This is like attending a weekend trading seminar... for free.
Some declining volume IB (daily) candidates:
ACM - Probably needs more consol.
FRPT - Intra-day strength EOD.
HLF - Good spot on LT daily.
LFG - Ready for range expansion.
Hey Jim,
Thanks. Great stock picks. I really like ACM and FRPT. I was looking at FRPT this week. Must have come up on one of my scans.
Check out the monthly chart LFG - multi-year PP test on Sept. lows.
HLF - Wait till price clears Thursday's highs. It's forming a scallop type curve this week. I personally find these types of patterns difficult to trade and Friday's bar could confirm a hanging man. Either way, there's a trade setting up here.
Gotta keep an eye on AAPL, VMW (strong EOD), and I think LEAP for Monday.
Jamie,
Excellent help! For clarification what is the test of the ORH base in SSTR ? I decided sometime Friday to focus on the Briefing premkt list(mostly naz/5%... one could have played FMCN-wide swings, SSTR-momo all day.if no 5%'s then go for the high pricers over $20), Trade Ideas 5% +/- Premkt and first 15 min>30k in that order. TraderX was right on his gappers >5% idea. I have to keep it really simple and prefer to have all the charts up before the open. Traded ACN TGT WYNN COGN. har and sstr had the best patterns.PRX NGA other good patterns.
Alex,
Excellent picks.
BL,
Sorry for the confusion, The ORH base is simply the ORH, for SSTR it's $4.14
PRX and NGA excellent - where did you find these - on a scan?
Jamie,
PRX NGA came off my Scottrade 5% Scan >30k. Also Scottrade Best Performers. Could have used Barcharts but delayed. I thought NR7 meant most narrow of the last 7 bars while NR meant just narrow range and also inside bar?
Thanks BL,
NR7 correct, but I use it in the generic sense for price and volume contraction as this is the trigger for price and volume expansion. NR is not necessarily inside so I specify when it is as this creates the coiled spring effect.
Jamie,
Great stuff as usual. I'm just curious, how did you get started with trading? Did someone pass the knowledge on to you or has most of it been gained by experience? Did you read any good trading books that put you on the right path?
Thanks.
Jonathan,
My brother who is a professional trader for a biotech hedge fund, got me interested in trading. He bought me a few trading books to get me started. Stan Weinstein's Secrets of Profiting in Bull and Bear Markets was the first book that peaked my interest. After that I started swing trading and after many more books, I eventually got into day trading.
The books I recommend are on my side panel under Essential Reading.
Also read my Stock Tickr interview for more info on my background in Intro to WSW Blog.
My trading improved greatly after reading blogs like Trader-X (gaps), Trader Mike (NR7), MaoXian (dummy trading) and HighChartPatterns (Base& Break) as well as countless others in my Blog links.
The key is to have a basic knowledge of technical analysis and then select and incorporate the blogger techniques that fit your trading style.
Jamie,
BTW,
Nice 15/30 charts for:wynn sstr nga har bidz prx cogn bbnd
Hi Jamie,
This is a very useful blog, thanks for the great work.
About JRJC, in this type of situation, how low below the ORH would you set your stop to allow for retest?
Pete
Pete,
I would use the low of the breakout bar as my initial stop. After the retest you can then move the stop just below the red hammer that breached the base. If the stock can't get going after one retest, it might not get going at all, so you don't want to give too much back if it's setting up for a failure.
Jamie,
This new information about your bother raises two very important questions:
1) Does he read your blog? and
2) Who is the "better" trader?
Jim,
1. Not often, he's too busy;
2. I don't know.
One thing I do know is that he's much more knowledgeable than me because he's been working at it longer , plus he has the credentials - CFA and CMT.
Jamie,
I was kidding... they are not very important questions. It can take a long time to determine who is the "better" trader. I once observed two seemingly great traders (partners) make large sums of money trading together. Circumstances eventually forced them to split up and trade individually. Both experienced short term drops in performance. Then one of the two went on to make BIG(GER) money and the other never traded above mediocrity. The dynamics were quite interesting.
It is neat that you and your brother are both involved in trading. Nice common ground.
Jim,
No problem.
Interesting story re: two partners.
Agree, sharing a common interest with my brother is a good thing.
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