Monday, January 12, 2009

Trading Key Support/Resistance Levels

POT gapped down and carved out a wide range bearish stick. Place the Fib. lines from the previous day high to the ORL or the key support level as I did here. $80.00 is a psychologically significant round number and was a key support level on Thursday's gap down as price consolidated at that level for an hour before filling the gap.

Look for confirmation on the lower timeframe as I did on the 5 min. which showed a weak open followed by a sideways bull/bear battle at the S2 level (red dotted line). When it became obvious the bears were winning, I jumped in.


SRS was a gapper which saw ripping on the TI scanner in early trade. Price retraced to a key support level just on the edge of the R-zone. This level was confirmed on the 5 min. which showed price holding and reversing at R1 with support from the rising 20 EMA. I placed my Fib lines from the ORL to the early swing high because this ETF broke resistance on Friday afternoon and setting them from PDL to ORH could result in an overly optimistic target.

The NASDAQ futures trade is not as obvious, so it's important to wait for a meaningful signal. In this case we had two inside bars (NR7) on declining volume - price/volume contraction ahead of expansion.



Click on charts for larger view.

11 comments:

addtrader said...

POT is always a trouble stock for me to trade. I am glad you were able to get it, and for such a nice move. Good Job!

Formerly ADD Trader

Jim said...

Nice Jamie. Today was much better for setups than last Friday.

PDT said...

Nice trades. Some questions (as usual)

Do you usually look to partial out at the 38% or 50% fix extension? Looks like from these charts you have been choosing 50%.

Your comment on the NQ trade mention NR7. Are those in fact NR7's or do they have the characteristics of a NR7 (price and volume contraction)?

PDT said...

Edit... about the NQ question. Just realized I was displaying pre market data. Scratch that question

Jamie said...

ADD,

I've been trading POT quite frequently lately. Maybe watching it everyday gives me some rhythm.

Jamie said...

Jim,

Yeah, today was a trend day.

Jamie said...

PDT,

I like to lock in some profits when price is in the R-zone. Why risk a reversal without banking some coin? It goes back to my theory that price will consolidate after 3 WRBs. If the bars aren't wide, add an extra bar if you can. Inside bars don't count.

Attitude Trader said...

Jamie,

Again, thanks for the charts...especially the Naz.

-AT

Susan said...

Excellent trades Jamie.

Jamie, how to set initial target for stocks that open below the PDL, bases at the PDL, breaks and enters the previous day range, example - GS today (Jan. 13). It based below PDL, breaks PDL entering the previous day range, retests resistance (PDL) and moves up. What should be the target/s for these types of trades? Any pointers that I need to remember while taking these types of trades?

Jamie said...

Thanks AT

Jamie said...

Susan - refer to new post entitled Fibonacci Placement