Thursday, October 05, 2006

Trade of the Day - United States Steel Corporation (Public, NYSE:X)

I don't know if Trader X would have taken this trade but it has his name written all over it, no pun intended ;) My trading plan today was high volume gappers because my usual suspects were extended after yesterday's huge surge. At 10:04 I ran a gapper scan through my real time stockcharts.com scanner. It spit out about 20 names which I quickly sorted through on a 15 minute timeframe. I picked the last one because it had an orderly price pattern and high volume (essential on a gapper setup).

The first stick was wide range with no shadows. The second candle had a fairly long upper wick but the third candle had a smaller upper wick and volume was still strong. My risk was 20 cents so I took the low risk entry on the fourth bar as price was crossing $58.00. I stayed in the trade until price came back in from the last breakout point of the day (blue line). There was never any reason to exit my position before that because price did not breach the rising 10 period EMA and the ascent was steady and orderly. Sweet!

6 comments:

Anonymous said...

Wow! Almost 10:1! That's an amazing trade, congrats and thanks for sharing it. (Another jab to start taking day trades in addition to swing trades :) )

Jamie said...

You're welcome Tyro. Check out the Trader X blog, he's the master when it comes to these types of gapper trades.

Anonymous said...

Jamie,
Good trade! A few questions, so pls bear with me.

-How did u manage to scan thru 20 charts so quickly to decide which trade to enter?

-Did u enter when the 4th bar cleared the high of the 3rd bar or cleared the close of the 3rd bar?

-I pulled out the chart on X & noticed that it has 50day MA @59.03, 200day MA @60.38. For day trading, do u ever look at these? Even if they could be located very close to your point of entry & could pose some sort of resistance?

Thanks again for your sharing.

The WHY-Trader

Jamie said...

Hi WHY,

My scan is pre-programmed and takes about 15 seconds to refresh. I create a new folder and drop all of the charts in and view them (10 per page). That took about 2-3 minutes because most of the names were eliminated either because they were too far gone or didn't meet my volume criteria. On a gapper I want to see at least 2-3 times higher volume than the previous few sessions.

I entered as soon as the fourth bar opened. My risk was the low of the third bar. I don't feel the need to wait until price takes out the shadows unless the shadows form a resistance line and they are all priced fairly evenly. Before entering the trade I looked at the 5 and 10 minute timeframe, both of which confirmed a safe, low risk entry.

I also looked at the daily timeframe before entering long. Price had already taken out the 10 and 20 EMA. I was sure it could go to the 50 SMA which gave me a prelim. target of $1.00. However, as the trade progressed, I felt it could go higher as there was a lot of momentum behind the move.

I agree that the daily view was a bit of a mess with all of the MAs crossing, but my risk was low. It's hard to find quality setups with 20 cents risk.

The three main factors that convinced me to take the trade were:
1. NR consolidation of the gap up.
2. Volume
3. risk.

Hope this is helpful.

Anonymous said...

Jamie,
Thks for the comprehensive reply.

For the stockchart.com scanner, r u currently using the 19.95/mo or 29.9/mo package? What do u find good or not so good abt this scanner? I'm looking around for a scanner, so wld like to hear your experience. Thks!

The WHY-Trader

Jamie said...

Hi WHY,

My stockcharts.com membership is the real time extra which allows me to run intraday scans (I think it is $29.9 per mth). I only use stockcharts for scanning when I'm not trading from home. My preferred scanning tool is the Trade-Ideas scanner which is much more comprehensive. However, this requires that you download the software on your PC. Yesterday, I was trading from my client's office, so I could only use the internet scanner available through stockcharts.

With Stockcharts I have to write my owns scans, whereas with Trade-Ideas, the scans have already been written and you just have to add filters.

You can try the Trade-Ideas - one week free trial by clicking the hyperlink on my sidebar.