Wednesday, June 27, 2007

Dummy Gapper Trade of the Day - NIKE, Inc. (Public, NYSE:NKE)

NKE gapped up on earnings and retraced slightly more than 38% of the move from the previous day low to the ORH. It then rallied back to the ORH but failed to capture it on a closing basis. This is not surprising because the retracement was quite deep and therefore, the stock was exhausted. That's why I prefer stocks that retrace less than 38%. On the next pullback, it carved out a higher low, price and volume contracted and the next attempt to break the ORH succeeded on a closing basis, so I entered long on the next bar. Price ascended in an orderly fashion until the last half hour when price ripped through the 38% extension and reached the 50. Fibonacci extension from the previous day low to the ORH.

9 comments:

Anonymous said...

Hey Jamie,

Had the same entry but got stopped out 4 bars later at 57.06... the low of the bar :-)

I moved my stop to 57.06 at 2R on the 15th bar. Guess I moved the stop up too early. When do you move your stop up ? Do you only look at the chart or do you consider your hypothetical gains ? Do you wait for a close under the 5MA ? I spent the rest of the day looking at it going up to the Fib extension, my original target...

TJ said...

This is a slow setup with < 45% angle on the slope, so it needs time. I only move my stop after a WRB completes itself and I place the stop two pennies below the WRB. For NKE, after the first WRB my stop was just 2 pennies below BE. On this trade there were only three WRBs until the big one at the end, so no, I don't move my stops often. Stocks move up and consolidate after WRBs so its best not to move the stop during consolidation unless it carves out a reversal bar and then you either get stopped out or scratch the trade. If the angle of the trade is steep, I move my stops more often, because fast moves also have fast reversals.

If you're too anxious and you want to book some of your hypothetical gains, partial out at the top of a WRB and leave the balance with the stop I suggest above.

Anonymous said...

Thank you for this info, it helps... will help a lot !

Lived in Montreal for 10 years, I miss the culture. Now in Colorado.

TJ said...

Welcome GT,

Visited Denver on a business trip when I used to work for Bell Helicopter (a long time ago). It's a cozy town, great for outdoor activities.

Prospectus said...

@Jamie: I love it when I trade the same stock as a pro! Doesn't happen very often, but it's great when it does.

I took an earlier entry, on a break of the third bar high. I had only one daytrade, so I couldn't partial out when it stalled at the OR high. I decided to close it out for 1R, since I didn't like the volume or the look of the broad markets at the time. Too bad, because I could have had a +3R win! Hindsight is great, but I haven't had much luck with OR breakout setups since the February drop, so I didn't trust it.

As always, thanks for your training in the past, Jamie. I would be a terrible trader without you, Trader-X, Trader Mike, and the other good bloggers.

@Greytrader: Since this is an NYSE stock, you have to watch out for spikes like the one that stopped you out on the 17th bar. I find that the specialists swing 'em around a bit to shake off the weak holders, so you have to give them a bit more room than NASDAQ stocks, as Jamie has suggested. Just my limited experience.

TJ said...

Thanks Prospectus,

1R still a decent profit. Good trade management.

Anonymous said...

Jamie,
Have you used the Briefing premkt gap up/down list successfully? I would think it gathers eyeballs.

Anonymous said...

Bell Helicopter... I used to work for CAE so I guess this makes us both ex -Engineers.

Thanks for the insight Prospectus, I followed your day on wallstreak :-)

TJ said...

BL,

Yes, I load the Briefing gapper names into Esignal and if I like the premarket action I keep it on the watch list all day. I don't bother with M&A as eveything is priced in on the open. I'm also looking at new IPOs. Yesterday SCOR caught my eye because of a lengthy Briefing comment. However, I missed the momo move.

I also load some unusual pre-market movers from the IB scanner. I like to have at least 6-10 gapper charts in my system before the open.