Wednesday, January 03, 2007

Trade of the Day - Continental Airlines, Inc. (Public, NYSE:CAL)

CAL gapped up on heavy volume following a week or so of range bound action. CAL is one of my watch list stocks so I didn't have to run a scan to find it. I did have to do little work to find the best entry point, so I drilled down to the 5 and 1 minute timeframes. The 1 minute chart below shows my exact entry. I wanted to get in before price broke through $42.50 as I thought it might run away from me. I liked the consolidation on the 1 minute timeframe. Price traded mostly sideways on declining volume as it waited for the rising 10 period EMA to catch up.

I closed my position on weakness. Despite the FOMC minutes and all the red ink that ensued, CAL held my target support level at $43.00 and set up another long entry into the close.

From the daily chart below, we can see that today's price and volume expansion was an NR7 technical setup.


Anonymous said...

Hi Jamie,
Great trade to start the year off with!

What was your initial stop loss for CAL?

I have abit of difficulty trying to sort out when I should look for low risk dummy entries and when to enter early in the trade to catch the big move. Hope you can help to address. Thanks


Jamie said...

Hi YR,

Sorry, I forgot to mention the stop. I used the 5 minute timeframe to set my stop using the low of the previous bar $42.17 as my guide.

Jamie said...


Re: when to look for dummy entries vs. entering early. If you want to enter early drill down to the lower timeframes: 10, 5, 1. Look for orderly pullbacks or consolidations on declining volume (as I did with CAL today) and try to find a low risk entry point. Confirm that it makes sense on your preferred timeframe before entering.

Also, this works best on very high volume gappers.

Good luck and let me know if it works for you.

Anonymous said...

Thanks Jamie. Will try it out