Tuesday, August 03, 2010

Ambush Trade

Ambush trades were developed by Hubert Senters of Trade the Markets. I believe he uses the setup mainly to trade futures. I find it also works well with trending stocks, stocks that gap, and stocks that test support/resistance in the opening range.

The first example below is FSLR's earnings gap on Friday. Price started to move lower, retraced into the ambush zone (50-62% retracement) and reversed. The basic rules are price must breach the 50% and cannot close beyond the 61.8% level. Wait for confirmation and enter the trade. Ideally, we target the 50% Fib. extension, but if price pauses and attempts to reverse at the base, take a partial.

The second example is PRGO today. PRGO fills yesterday's gap in the opening range, moves up to test resistance and retraces into the ambush zone. Wait for confirmation and take it long.

NFLX initially looked like a good ambush setup until price closed beyond the 61.8% retracement level.

AMZN initially looked like a good ambush setup until price closed beyond the 61.8% retracement level. In this case, the setup did give the desired result, but we have to establish rules and stick to them. I'm still experimenting with this setup and may eventually work around this problem.

Swing Trade Setup:

RIMM filled it earnings gap today and sold off on high volume. I think she's done here and will be looking to swing swing short below 20 EMA ie. trendline break.

5 comments:

RivTrader said...

Hi Jamie,

Thanks a lot for your answer on my query regarding "ambush" trade. Now I got the idea how "ambush trade" is all about. I will study more about it how I can apply to my trading. Thank you so much Jamie.

承王蓁 said...

It is easier to get than to keep it.......................................................................

Jim said...

Jamie,

Excellent post.

So far, nice swing call in RIMM. Also setup intraday ambush good for test of lows.

Do you trade reverse ambush? Example from today is BEXP. Failed ambush ~1 hour in, then reverse ambush ~2.5 hrs in.

jordan said...

Hi Jamie,
When u mention to wait for confirmation, what signs to watch for confirmation? For FSLR, u entered on break of previous bar low, is that your norm entry for confirmation? Thanks

Jordan

Jamie said...

Thanks guys,

Jordan,

On the FSLR ambush, I was planning to short below the hanging man, but then it made a higher high which gave me the opportunity for a tighter entry. I waited for price to take out the preceding green stick because it was a wide bullish bar.

Today I ambushed AMGN on the 15 min. timeframe, but the shooting star and wide red stick which preceded the small green hammer (10:30) in the ambush zone were too bearish, so I waited. I didn't enter long until price took out the high of the 10:45 bar. In other words I waited for the bearishness to neutralize itself and that provided me the confirmation I needed to commit money to the setup.

If the setup is not clear on the 5 minute timeframe, use the 15. It's probably easier to get started with this setup on the longer timeframe.

Jim,

I guess the AMGN explanation covers the BEXP failed ambush. The reverse ambush was good. I'm also finding that it is easier to trade ambush with watchlist stocks than it is with unfamiliar gap list stocks.

The RIMM swing and day trades are good. The RIMM ambush stalled at the base - lots of support at $53.00. It shed 5 points in two days, so the pause here is understandable.