Tuesday, December 19, 2006

Dummy Trade of the Day - MasterCard Incorporated (Public, NYSE:MA)

MA had a technical bounce from a gap fill dating back to Nov. 10-13. The high on Nov. 10th was exactly $90.50, matching the low on today's wide range, opening bar. However, there was no low risk entry so I decided to let it go. I checked back during lunch to observe the consolidation and decided to watch it closely in the afternoon. Around mid-afternoon, a low risk dummy setup presented itself and I jumped in.

I noticed a strong uptick in volume in ENER on a retest of the morning low. I checked Briefing.com for any news and they had just posted some bullish comments from a boutique firm. Usually, Briefing is late posting comments and I was surprised that I was able to catch this one so early. I took a long entry on a break of the doji high. I booked my profit as price approached the upper level of the resistance zone. This is a scalp so I prefer taking profits before they disappear.


Inept Trader said...

were you planning on holding MA to the close? Did you have a preset target for it? Or, in other words, what was your exit plan after you enter your position?


Jamie said...

I was looking for a low risk entry on a momentum stock. Once the trade was well underway, I moved my stop every 15 minutes. Everytime a bar completed itself, I moved my stop a few pennies below the low of the last completed 15 minute bar. I watched closely as price came into resistance at $96.00, but it barely paused at this level. Notice how each volume bar is stronger and stronger. Protect you profit by moving the stop up every 15 minutes. This is a good strategy for novice traders especially in late day trade setups.

Played this one again today. Chart later this evening.

christie said...

How did you find MA?
Thank you.

Jamie said...

Hi Christie,
I found MA through a gapper scan in November (November 13th if memory serves me well). After reviewing the daily timframe, I noticed that average daily volume had doubled since the beginning of November so I added it to my momentum watch list.

My momo list includes such stocks as RIMM, AKAM, AAPL, NVDA, CAL, X, NYX, ICE, CELG, GROW, FFIV, BIDU. These stocks tend to trade in a more orderly fashion and thus respond to key technical levels.

Christie said...

Thank you for the momo list. Would you please expand on what you mean by
"trade in a more orderly fashion and thus respond to key technical levels." I hope it is not too much to ask.
Thank you.

Jamie said...


A good example of an orderly trade is MA yesterday afternoon. Notice how it broke out, retested resistance as support and then rallied. During the rally, there was relatively no overlap of the real bodies of the candlesticks and the shadows were small. Despite the relatively steep angle of the move, it was an easy trade to manage.

What I mean by responding to key technicals levels is support/resistance, pivot points, moving averages and gaps. For example when a momo stock fills an open gap, everyone is watching and they jump in because it is a key technical level. That's why MA started to rally as soon as its Nov. 10th gap was filled to the penny. Also, look at RIMM last week, it rallied from support of its rising 50 day MA.

That's a primer for now. Keep reading the blog and you'll get a better feel for it soon.