Trading Inside Bars To Fend Off Volatility Monster

Nimble traders thrive in volatile markets, but some of us work better under more orderly conditions. After my first two longs basically went nowhere fast, I decided to stick to the basics of trading 15 minute inside bars, ideally NRIBs, in order to avoid getting chopped up today.

HANS was either going to form a bear flag or retrace after the sharp decline. It set up a nice base on the 3 minute chart so I took a chance. Break on IB, stop a few pennies below the IB. Once it took out R2 on a closing basis, the retracement was obvious. Partial after 3 WRBs. Stop on break of NRIB.

I took a second entry on the failed C&H pattern, but it didn't do much.

ENER was a B&B NRIB. It stalled at the 62% Fib. extension of the ORL to the base. I'm not surprised, and I guess I should lower my expectations on long setups since we are now in a downtrend.

LEH was a failed BO at $24.00, followed by a NRIB. I took a partial at the first support level. This allows me to leave a BE stop on the balance of the trade because most stocks attempt to bounce at support so they need a little wiggle room. Thought it might retest the the ORL after the second support level was taken out, but buyers jumped in at $21.50.

SOHU carved out a bearish rounded top, followed by a sharp move into support. It consolidated that move by printing 3 IBs, the last of which was NR7 (price & volume contraction ahead of expansion). I took a partial as price approached support and exited the balance on a capitulation volume spike.



SOL was a HCPG pick. I ignored it because I mistakenly thought SOL wasn't shortable through IB. Got mixed up it SOLF. Anyway, it was a beauty as you can see from the chart above. It set up perfectly at $19.00 after two NRIBs on the daily.

How to identify tradable IBs.

I start by sorting the watch list by % change and focus on the outliers. I also run a 15 min. NR7 scan (Trade-Ideas) on all my WL stocks as well as the HCPG trading list.

I look for setups with at least 1:2, and hopefully 1:3 risk:reward ratio. I prefer NRIBs or NR7 sticks whose bodies form in the shadow of the outside bar like LEH. I look for placement within the context of a particular pattern or typical B&B setup, as well as support and resistance, and proximity to the EMAs 5 and 20.