BHP was a gapper that I found through my simple scan - stocks priced between $10-200, gaps open above previous day high with at least 300,000 shares traded by the time I run the scan -usually 10:00. First thing that caught my eye was the inside bars. However, volume was lower but not declining which is important for the expansion effect. I looked at the wide range view and saw that we had resistance at $79.40 so I decided to place a buy stop order 2 pennies above resistance. I made this decision on bar 4, so I already knew that BHP was testing the ORH. If it failed to hold the ORH, it would never reach my buy stop order.This strategy worked out nicely as it kept me on the sidelines until BHP was ready to move higher. I took a partial at Friday's high and closed the balance after price started to retreat from the $81.00 level.
I was hoping price would retrace 38% of the move from the ORL to the morning swing high and set up another wave, but it only retraced about 25% and it was too confusing with all of the offsets, and the FOMC minutes coming into play, so I passed.
LDK was from the Briefing list. I saw the bullish doji morning star reversal pattern and I knew that LDK was finally ready to start to recover some of the losses from its recent sell off. I waited for the breakout of the base. I took a partial at the base of the green hammer and was stopped out on the balance when price fell below the hammer low. I had to re-enter on the next base and watch it carefully when the FOMC minutes came out.Even though I made a lot more moneyy with LDK, BHP is a more traditional gapper play so that's why, it's the "Trade of the Day".
21 comments:
Hi Jamie,
What do you think about DRYS as a cup & handle setup on the 5-min time frame from about 10:05 to 12:00? Obviously it failed, but do you think it was a valid setup?
Thanks.
Jamie,
How would you have traded VMW today? (or would you not?) I thought I saw a cup-and-handle formed by 1pm (both 5 & 10mins), but that little Upper-shadow (formed before the 1pm bar) stopped me from entering. (Even if I had entered Long, I would have stopped out.)
The second test of the Day-High happened shortly after 2pm broke through and it just went off. But I just couldn't spot an entry. I would like to see what you would have done.
Thanks!
Jonathan,
DRYS 5 min. has all the attributes of a perfect C&H including dip in volume as handle forms.
If I look at 15 min. it looks like a head fake followed by a dip which holds the low of the original handle and then finally an extension. In other words, handle needed more time to form. Probably failure due to timing of BO which goes into lunch hour.
CDt,
Lots of C&H patterns today. However, all patterns which broke out during lunch were vulnerable. Due to FOMC minutes coming at at 2:00, anyone leaving for lunch and not sure to be back in time would close open positions. So we had a lot of head fakes (refer to comment re: DRYS C&H).
If I look at 5 min. timeframe for VMW, I see Cup and double handle. Volume picks up after 2:00 - 2:05 inside bar at base of ORH. Long on break of 15 min. ORH with stop a few pennies below inside 5 min. bar.
BTW,
My LDK second entry is also C&H although I entered prior to BO of base ($43.75). It extended a full 100% from low of morning star to high of base.
jamie:
man hat BHP looks neat. How do you do your scan and get the right in short time.
I use IB , and then see gap-ups/down list say as many as 20 stock each..
Then start looking at the intra day but takes a lot of time..
Or do you use software llike trade ideas?
thx
sam
Thanks Sam,
I use multiple sources for finding gappers:
1. Briefing.com gappers in pre-market post;
2. Trade-Ideas pre-market scan;
3. IB
4. stockcharts.com gapper scan that I wrote myself as described in this post if not enough good candidates from three previous sources.
5. Also sometimes check NASDAQ market site for names with unusual volume.
Jamie,
If there is no resistance at $79.40, would you have entered on break of 3rd bar high or break of ORH? Not a big difference in this case, but i would like to know the perfect execution. Thanks
YR
Jamie, where did you place your stop on the BHP bo? Below the resistance or below the bar?
YR,
No, there were caveats as mentioned in the post. Two inside bars - volume was lower but not declining. Also both inside bars were doji-like which bothered me as well.
If the third bar was narrower on lower volume - yes.
I need a compelling reason to enter a trade because stop outs are very costly.
PN,
Below BO bar around $79.12.
jamie:
how good is tradeideas.= since you have to pay for it..somehow i feel it is not worth the money...
thx
TI is great and worth every penny. I don't use odds maker only std. sub = $65.00/month.
How I use it:
pre-market scan for gappers;
constant monitoring of Watch list;
NR7 scan;
BO scan.
jamie: I mentioned to greytrader on my blog that I'm easing my way into your watchlist. What I'm trying to do is look for easily identifiable setups... ones that I understand completely. So, in addition to the inside 2nd bar setups I also scan your watchlist on the daily chart and look for inside bars nearing potential areas of support or resistance. I place alerts the night before and look for a good entry at the daily pivot point. Well, I haven't entered any trades yet, but I have seen a lot of nice setups - waiting till I feel comfortable with my probability of success. Yesterday presented another two good opportunities that I hope to spot and capitalize on in the near future. The first was ABX. It printed an inside bar on 10/8 near the daily pivot of 41.34... which is where I placed my alert (just below). If you look at yesterday's 15-min chart, you'll see a great inside bar form right at the intraday R2 and just below the daily pivot. It popped for a nice .60 gain. Another was CELG. It formed an inside bar, inverted hammer on 10/8 on the daily and I set an alert just below the daily pivot of 72.91. If you look at yesterday's 10-min chart, you'll see a nice inside hammer right at the daily pivot. This was good for a .70 gain or so. On days when gaps aren't producing the bacon, it's great to have your watchlist to pay attention to. That's my plan at least... diversification without confusion. Any feedback on those two stocks?
FWIW... here are the stocks I've identified for tomorrow/today: JASO, SIGM, MDR, ADSK, CAL, AKS
Also, VMW looked like a nice cup and handle on the 15-min? I'm not great with identifying them... what do you think? There was a nice 2pt gain right after R2 on break of the 2pm bar high.
OONR7,
That's a great way to get a feel for how trading a WL works. Both ABX and CELG were excellent choices and the intra-day setups you described were well supported by big volume.
Thanks for the focus list for today.
MDR is in the same space as SGR which just reported earnings this am. Some confusion on Briefing.com re. comparable Reuters estimates. But so far seems that they blew away est. and stock trading up in pre-market.
What do you have in mind for ADSK?
Also watching DISH - several NR consolidation bars - basing around $48.50-$49.00; NIHD - yesterday's intra-day NR trade could be setting up a bigger move; AMGN B&B above $57.75 - that is a three month base which could set off a powerful move.
Have you started with HCPG? They have a few additional stock picks which are also on my WL. Through their service I was able to enhance my B&B trading.
Yes, VMW and DRYS we talked about in comments re: C&H, also my 2nd trade in LDK was C&H. Easier to identify on 5 min. than 15 min.
Jamie... haven't started with HCP yet, but will this week. As for ADSK, I see an inside, doji-like candle yesterday right near the pivot high. If it crosses $51 on heavy volume it may make a nice run.
SEED was a great example of the cup and double handle on the 5-min chart. I missed it but it was very obvious. Big move, hope one of your readers nabbed it.
OONR7,
I nabbed it.
Jamie,
You mentioned above that all patterns which broke out during lunch were vulnerable. I just want to confirm that this is in the context of due to FOMC minutes coming out at 2:00, and does not apply on typical days?
YR
YR,
That's correct - exception due to FOMC.
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