The first chart is the daily time frame for AKAM which gapped up on the open due to earnings. I was looking for a suitable base as an entry point which I identified as the August swing high (see blue arrow) and then plotted the blue line on the lower time frame to see how price would react.
After consolidating the gap briefly, price moved back to the blue line. On the 5 min. time frame, we see that it did this on a WRB. I waited until price broke out and consolidated above the line and then took a long entry. I took a partial at the 38% Fibonacci extension of the previous day low to the base (blue line). After that I was looking for a normal retracement of 38% from the morning low to the swing high.However, on the 15 min. chart below, we see that AKAM carved out a red star with a long upper shadow, followed by two inside bars on lower volume. That looked like a short, so I tightened the stop below the star and I was stopped out.
Trading tip in reference to 5 min. chart - Normally, price will consolidate at the base. Ideally, you want price to consolidate before the break, so you can enter on the actual break. However, if price breaks the base with a WRB or a thrust from a series of smaller bars, it will usually consolidate after the break, so it's best to wait for a lower risk entry point after the consolidation as I did on the AKAM trade. If price, tests the base and then consolidates sideways with NRBs, I usually buy the actual break.
14 comments:
Did I read the trading trip correctly
and that if it took 3 NRB's to arrive at the base you would NOT buy the break because that is the equivalent of a WRB in need of further consolidation?
Mike,
Thanks for the feedback. Maybe a poor choice of words on my part. What I meant was that price almost always consolidates at the base before breaking out. But, if it breaks in the process of a sharp thrust, it will likely consolidate after he break.
A good example of what I like to see on a BO is the OTEX trade above. Price rallied up to the base - three consecutive green bars wide and narrower, paused at the base of the handle and consolidated sideways, culminating in a little green hammer before breaking out. That type of setup can be traded with confidence on the BO.
Hope that makes it a little clearer.
Mike,
Following your comment, I modified the text in the post to more clearly articulate what I was trying to communicate.
Thanks!
Jamie,
You are laying out pure gold for your readers!
I have been working a niffy scan technique in TI - not watchlist based. One neat feature is that it can involve carryover info from the previous day. If it continues to produce good results (low # alerts and high % of good trades), I will pass along.
By the way, I wonder why TI does not have an inside bar alert. That would be a useful feature on the 15 and 30 min timeframes.
Thanks Jim,
I'm intrigued by your new TI scan -look forward to hearing details!
I've asked myself the same re. inside bars, but think they might feel it is covered by NR7. I can write to them and find out. I'll put together a few examples and send it off next week. If you think of anything else, let me know.
Jamie,
Niffy = combo of nifty and iffy.
As you know from playing with NR7 alerts, an IB alert would add much more. Additionally, here is what we need:
1) Min 10/15/30 min OR as a % of price, AND
2) # consecutive bars (or real bodies) following OR that are inside of OR (10/15/30 min). This alert would count up similar to the NR7 alerts (NR7, NR7-2, ...). #2 is more important than #1.
Examples: RVDB, CMCSA and ~PNRA from today, AMZN from Tuesday
Jamie,
After AKAM broke out, it printed candles with long upper tails. How do you tell that consolidation is ending (or ended) and take entry?
Jordan
Jordan,
I take into account all of the info available at the time.
1. Price above R2
2. Price holds the base on 5 minute consolidation bars.
3. Both 5 min. consolidation bars have identical lows $36.08 which leads me to believe it is solid.
4. Rising 5 period ema is reasonably close to price.
5. Third 15 min bar is WR green.
6. My expectation is that price will at least test ORH so there is very little probability of a loss if I manage the trade correctly.
As you can see from the 5 min. chart, the test of the ORH was very orderly (sideways consolidation with no breach of 5 ema). If price had tested ORH and immediately started to retrace, I would have scratched the trade.
Jim,
Thanks for the feedback. I will incorporate your ideas into my email to TI.
One of the things I don't like about about the TI NR7 scan is that it doesn't take volume into consideration. A true NR7 represents both price and volume contraction IMO.
Jamie,
I sent you an email (per Blogger profile) on how to account for volume in conjunction with NR7 alert. Let me know if you do not receive.
Hey Jim,
Thanks for the email. Just trying to wrap my head around the NR7 max volume %. I guess it's late and my brain is tired, but does a lower max volume % tell me that volume on the NR7 bar contracted from the previous bar?
Jamie,
Not from the previous bar, but from the average volume for THAT same intra-day bar over the last X days.
Think of it this way:
If max volume=100%, it will only alert on a bar whos volume is <= 100% of average for THAT bar over last X days.
If max volume=90%, it will only alert on a bar whos volume is <= 90% of average for THAT bar over last X days.
I hope I am saying this right.
Thanks Jim,
That confirms my thinking.
Jamie,
Sorry for the late reply, I was travelling. Thank you for sharing the info you assess at the time of trade.
May I know what is your entry price?
Jordan
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