Tuesday, February 01, 2011

Scanning for Momentum Day Trades

Scanning for momentum stocks intraday can provide low risk trading opportunities in addition to the usual suspects from the focus lists.

The scan I use is very simple to create and provides a short list of momo names.

I look for stocks priced > $10.00, with average daily volume > 500,000 shares. Today's price is > than yesterday's high by 1.005. Today's volume is tracking 1.5 times average. RSI > 60.

Today's scan produced a longer list than yesterday given the market rally.

The stocks I focused on were MTW, TUP, and FMCN as depicted below.

MTW was a wide gap to new multi-month highs. On the 15 minute chart below, we can see that volume is tracking far above average, hence the momentum play. Wide gaps generally need time to consolidate the gap before moving higher. We wait for price and the rising 5 period EMA to come together. If the 5 ema holds as support, we can plan for price extension.

Confirm the setup on the 5 minute timeframe. MTW looks good as price hold above 20 ema.

Price/volume contraction (coiling) precedes expansion, so we plan an entry on a break of the base. Took a partial at the next $ level.

TUP, another big volume gapper, did not hold the 5 period EMA on the 15 minute timeframe, but it did form a narrow base just below first level support at the cusp of $52.00. Here again, we see price/volume contraction ahead of expansion.

FMCN found support from rising 5 period EMA on 15 minute timeframe. I was looking for price to expand and retest the ORH. It started out nicely, but suddenly retraced back to the entry point. The bounce off of support was weak. I bailed when it couldn't hold $27.00.

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