Apple Inc. (AAPL) Ambush In Play

AAPL has retraced back to ambush zone of the Fibonacci extension.  This support zone should see buyers step in for a bounce.  The negative divergence of the RSI to the last higher high suggests caution.  At this point, we don't know if AAPL will reach the next target of $770.00, but we have a good idea that it will get a bounce from support.  Failure of the ambush zone to hold as support would mean much lower prices going forward.

This morning AAPL announced the sale of 3 million ipad minis since it went on sale last week. The stock is higher in pre-market.

Technical Picture - Constructive Price Action

IBD is changing their market outlook from "Market in Correction" to "Market in Confirmed Rally" based on the out-performance of the Nasdaq today, despite the lack of volume. The logic is that prices have moved high enough above 50 SMA. The next hurdle will be to get above 2800, which should take time as there is a lot of resistance.

As we can see from the 60 min. SPY chart below, we briefly fell out of the rising wedge on late day weakness yesterday, but managed to hold in early trade today and recover by the end of the session.

If copper is a leading indicator, it may be premature for the bulls to reclaim victory, as copper has slipped back below both the 50 and 20 MAs.

Leading stocks are performing well. A few examples include SOHU and UA strong performance today as depicted in charts below. LULU strong performance yesterday with follow through today.

Day Trades

SOHU was on my focus list. I entered small size on break of weekly R1. I added when price held R2 and formed a bull flag. Exit at daily resistance. I missed the UA trade because it didn't show up on my momo scan which has a criteria for min. RSI of 60.

APA was a HCPG pick for target trade back to resistance.

APOL gapped down on weak earnings. I shorted it when it breached it's base, but the trade was slow and lacked volume. I covered on the first signs of a reversal. I entered long when it consolidated back at the original base. Exit at daily resistance.

RIMM set up a long entry on third test of resistance, but wasn't able to follow through after the initial thrust.

Technical Picture - Minor Losses

Minor corrective action on weaker than expected economic data and confusion over foreclosure processes, as depicted on the intraday SPY and QQQQ charts above and below. The SPY retraced 62% of the last leg up and the Q's retraced 38% before bouncing into the close.

After hours, GOOG's big earnings beat ( +$0.96 above consensus) have NQ Emini futures trading slightly above daily resistance. GOOG is up close to $50.00 from its daily closing price.

Tomorrow is OPEX so expect more volatility for option-able stocks. Also, keep an eye on the economic calendar.

Today's Day- Trades:

FSLR was testing its trendline after retracing 50% of the last leg up. It had carved out two NRBs ready to expand. The pre-market price action setup a tradable entry point at $140.00. The targets based on the daily were 20 MA and resistance at the blue line. The trade was executed as depicted below.

CREE had relative strength yesterday in the wake of disappointing earnings by INTC, so it was worth a second look. As you can see from the daily chart below, it was a good candidate for a target trade to the base of resistance at $57.00. I'd like to see it consolidate at this level before breaking out. The next target is a move into bearish gap resistance.

Price penetrated the PDH on the OR and consolidated setting up an easy long.

STI was from the Trade-Ideas scanner and setup a bear flag short on banking sector weakness.

Going forward, I like the following charts:

ALTR has held support of BO point and is testing the trendline. Long above blue line.

WYNN is holding support of $100.00 as it flags. Could be a big move.

AMZN has been basing $157.00 for several sessions and will likely move higher in the aftermath of GOOG's big earnings beat. Hopefully it won't gap too much.

P.S. To Trader-X fans, he's back!

Friday's Trades - Research In Motion Limited (USA) (Public, NASDAQ:RIMM); Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

HCPG daily spot for MOS on Thursday night's newsletter was $55.00. Juxtapose the MOS 15 min. and the POT 15 minute timeframes and they are identical. So, if we can target trade MOS to the daily spot, we can also target trade POT to resistance of Wednesday's high. I'm not suggesting that you trade both, I'm just saying, if like me, you prefer POT, trade POT. Get your inspiration from the HCPG newsletter, borrow the setup from MOS and apply it to POT, or not. Either way, both trades are winners.

The trade is executed on 1 minute. Price forms a handle at the base, breaks out for a gap fill, consolidates and extends to the target.


RIMM was an ambush setup on the daily. RIMM turtle souped (printed a lower low on initial test of support of the PDL and reversed). It chopped around and eventually carved out a tradeable triangle on the 1 minute timeframe. After the BO it moved quickly to close the gap, consolidated and rallied up to PDH.

More consolidation in the upper half of the day's range led to a second entry.


Friday's market action was narrow range and choppy, but also on the bearish side, so that tells us that we don't want to over stay our long positions. Target trade and get out.

N.B. Turtle Soup refers to a Linda Raschke trade setup I read about in this month's Active Trader magazine.

Fear and Greed

Markets are said to be efficient when fear and greed are kept in balance. Market bubbles occur from excess greed and bubbles burst and over correct out of fear. The recent oil and commodity bubble was brought on by greed and the ensuing correction was excessive out of fear.

On a micro level, day traders have to deal with emotions of fear and greed everyday in their trading. Fears of losing and missing out are basic. The fear of losing usually leads to tight stops that may cripple the trade before it has time to develop and the fear of missing out usually comes in the form of abandoning the entry rules in order to chase stocks that are ripping.

Greed usually manifests itself by being swept away with a winning position, thinking it's going to keep ripping and turn a mediocre day into a big winner. Dreams of this nature can cloud the trader's perspective and force him (her) to throw trading rules out the window.

The most realistic approach to trading is to aspire for consistently profitable trading results by applying focused and disciplined trading rules. A disciplined approach to trading rules will help the trader manage entries and exits, thereby relieving the trader from acting purely on the emotions of fear and greed.

A 50% win/loss ratio can be a very profitable business if the trading rules are consistently adhered to. As long as winners run at least 2:1 over losers, and preferably 3:1. But every trade has to meet certain pre-defined criteria and the trading rules have to be applied in a consistent and disciplined manner. If either or both are missing from your trading plan, your trading results are likely unsatisfactory. If this rings true for you, the beginning of a new year is a good time to start elaborating the criteria and the rules.

A reader submits the following: BTU: Entry on the break of the 11:45am candle which is an inside NR7 bar. It was also basing under the round number $28.00 and it looked liked it tested the PDH a few times. Target just ~ $29.00. Action went sideways for most of the afternoon until a nice little jump at around 2:30ish. Had a decent profit but gave most of it back because it never reached my target. In retrospect I should of at least partialed after the 3 WRB.

Okay, I'm not sure why the target wasn't met, because the Esignal chart shows that it was tagged. I would just like to emphasize the need to sell into strength and you should plan the exit as price approaches the target for example exit at $28.95 as opposed to exactly $29.00.

The entry is good NRIB (NR7) at the base of PDH. The long basing period may have contributed to a sense that price could go higher than the initial target, however, we have to stick to our trading rules - 3WRBs, Fib. targets, whole $ dollar levels are all areas of profit taking and/or consolidation. Take at least a partial. If price consolidates and wants to move higher, there's nothing to prevent you from adding back.

Made a similar play in ACI and I was wondering if it is stupid to do that since they are basically in the same space as each other. They were pretty much moving in lockstep.

Not stupid at all. I often trade pairs because it's much easier to manage two positions in lockstep than not. Always good to find ways to capitalize on sector strength/weakness.


The GG trade is mine. I took a partial at $28.00 after a small profit because it was an obvious support level. In my heart, I had a good feeling that it would eventually go lower, but price is pre-disposed to consolidate at obvious support levels, whole $ levels, fib. targets, 3 consecutive red bars. I'm being repetitious on purpose. The key take away is sticking to the trading rules to protect profits. Price could have easily reversed at support and retraced.

As I said above, there's no reason not to get back in if price consolidates and wants to continue in your direction. This GG consolidation is a thing of beauty - a series of lower highs on a flat base with the 3 MAs (5, 20, 50) squeezing into a tight formation. Burn this 1 min. chart to memory.

I re-entered full size, partialed again when price stalled at the half $ and exit as price approached the whole $ level on capitulation volume.

Watch List Target Trade - Apple Inc. (Public, NASDAQ:AAPL)

AAPL was a target trade to $172.00 which I pointed out last week as a significant pivot point. I took a partial at support and closed the second half before the target was reached. The target was eventually reached and I'll be watching for the next test of $172.00 as a potential breakdown.

FWLT was a trend line breach. Ran into trouble but managed to get back in.

No pre-market post tomorrow.

Base & Break - Arch Coal, Inc. (Public, NYSE:ACI)

Yesterday we said that ACI looked like a C&H waiting to BO. The first chart highlights the C&H pattern and expected Fib. extension of 100% from the ideal BO point. The blue lines represent pivot points and basing areas. Whenever we execute a planned trade, we want to find a low risk entry point near a pivot point, targeting the next level pivot as a possible exit. On a measured move basis, chart patterns such as a C&H usually extend 100%. That's the norm, but sometimes they surprise us with bigger or smaller moves. It depends on the market and momentum. In our case the 100% extension of the pattern lined up almost perfectly with the next level PP, so this added an extra element of confidence in the setup.

Today ACI gapped open and retraced approx. 50% of the move from yesterday's closing lows to today's ORH. It breached the blue line in early trade, retraced sharply and began forming a base at the PP through a couple of higher lows. The best time to enter is after price settles into narrow range trade at the base to of the PP, or wait for the retest of the base after the BO. Don't buy if price runs up quite a distance to reach the PP, wait for price and volume to contract just prior to BO. I know that this is not as easy as it sounds, but it helps to put you in a winning trade much more quickly rather than sitting through all the backing and filling.

As you can see from the chart below, once price successfully retested the base, it took off nicely reaching the target in an orderly fashion.

We also mentioned that we would like to short LEH if it pulled back to the broken trend line or 50 SMA on the 15 minute time frame. Neither of those two things happened as LEH opened weak and spent most of the session chopping around. There was little opportunity for a decent size profit because price was so close to the $17.00 target anyway. Don't force a trade if the risk:reward ratio is less than 1:2 or ideally 1:3.

Target Trade Flag Pole- United States Steel Corporation (Public, NYSE:X)

X set up as a target trade to support on the daily as commodities cratered off the open. From the 15 min. chart below we see a weak opening range followed by WRB which tags support from yesterday's swing low. I was expecting a series of NRBs to form at the base, but price breached the base and continued lower. IMO, every flag pole, needs a flag (narrow range consolidation) before the pattern can continue in earnest. Finally, X printed a hammer reversal bar which was the beginning of the flag. Price retested the base and then carved out a NRIB NR7.

I ignored S2 because as far as could tell, it didn't line up with any congestion or support area. I covered as price approached the target and round $ number $160.00.

My second X trade was a trendline breach on the 1 minute time frame. After retracing back up towards the declining 20 EMA on 15 min., X printed a shooting star. On the 1 min. chart price swooned into the trendline, consolidated briefly, before breaching and ascending the second leg down.

Failed flag pole and flag pattern on DRYS. S2 is significant here and dates back to the second week of June.


COG was an inverted C&H pattern. The key take away here is don't enter the B&B after a wide move into the base. If price doesn't consolidate prior to breaking out, it will after. If it breaks wide, it will most likely come back and retest the base. Either way, patience pays off with a better risk:reward.

Target Trade (Base & Break) - Fording Canadian Coal Trust (USA) (Public, NYSE:FDG)

The objective of this blog is to identify day trading strategies that deliver based on sound risk:reward principles. It's not a day trading journal. I do take my share of boredom trades like everybody else. But, I see no point in publishing the latter because it doesn't fit with the objective of the blog. Moreover, I generally post three times daily which is a huge commitment and I don't want to waste time on items that may have little interest to most readers.

Thanks to all those who submitted feedback over the last few days either through posting (Thanks Jim!), comments, and/or emails. I've got a backlog of emails so it will take a few days to answer everyone. I plan to get back to regular postings after the long weekend.

Tonight, I'm focusing on a single trade. The midday reversal on GM's sales news probably caught many of you covering shorts as this trade did for me.

The first chart is the daily chart and it highlights a target trade - trading to the pivot point as opposed to trading from the PP. Basically, I was looking for a break of yesterday's low to take me back to the PP base which lined up nicely with the rising daily 20 EMA. Target Trading is something I learned from HCPG.

The 15 minute time frame looked somewhat like a H&S top. On a measured move basis, the 100% Fib. extension from the top of the head to base lined up perfectly with the daily PP target.

The 15 minute chart shows how price broke out of the base and carved out a WRB which closed on its lows. When the BO bar prints wide and closes weak, we know we have an excellent chance of success. There's one caveat though, and that is the lack of a dicernable volume increase on the BO bar. The volume is easier to see on the 1 minute timeframe below. I took a partial at the next support level because normally, this is where price starts to consolidate the last leg down. There wasn't much of a consolidation, before price continued lower. I was almost certain of reaching my target when the second WRB closed on its lows, but I was expecting a consolidation because now price was so far away from the down sloping 5 period ema. Price and the 5 period EMA are like magnets, eventually they always come together.

As you can see from the chart, they decided to get back together sooner than I would have liked. Consolidations can take place through price or through time, or a combination of both. Usually it's a combo and price and the ema share the workload, but in this case price did all the work and the 5 period ema just sat back and waited.

Rule of thumb if there's no reversal stick to foreshadow a retracement or reversal and nothing else to key off of, don't give back more than 38%. 38% is a normal retracement, anything more than that could turn into a reversal.


There was no NRIB, NRB or NR7 on the 15 minute timeframe to setup the trade properly, but this does not deter me from taking the trade if I see an orderly three PP base on the lower timeframe.

Click on the chart to read my notes. I like to see price consolidate in a narrow range before breaking out. If this doesn't look like it's going to happen, I wait for the BO and the retest before committing money to the trade. This avoids getting caught in a head fake which can be quite costly if you are using Point A as your stop.

Target Trade - SINA Corporation (USA) (Public, NASDAQ:SINA)

The first chart is a daily of SINA. Resistance at $53.00 based on yesterday's close. I was looking to target trade this one to resistance if it set up a B&B at or near $52.00. Worked out perfectly. Got the idea from HCPG based on their assessment of SOHU last night.

The second trade was based on support of R2 and potential run to $54.00.


TTEK - Much better today than yesterday.

Steel sector was sort of split, so I guess I should avoid trading the leader when all the rest is so choppy, unless there's a story. I had plenty of opportunities to scratch the trade. If they don't take off right away, that's usually the best thing to do. Because the shooting star (BO bar) closed green, I hung on.