This is a 3 minute chart of my gapper trade in FCSX which gapped up on earnings this morning. After gapping wide it consolidated the gap on declining volume and formed a triangle. I took a dummy long entry as price broke the triangle to the upside. Price quickly took out the ORH on accelerating volume and I thought I had a big winner on my hands. After breaking the ORH, price started to consolidate at the round number level. Suddenly I noticed a bearish tweezer top forming, so I tightened the stop to the ORH (blue line). As you can see from the chart there was a gap down at my stop so I suffered a lot of slippage. FCSX has an incredibly wide spread to begin with so its not for everyone. Lesson learned - careful when trading stocks that report earnings before the bell as opposed to AH. Conference calls can be very inconvenient to day traders.
Thursday, July 12, 2007
Dummy Gapper Trade - FC Stone Group, Inc. (NASDAQ: FCSX)
This is a 3 minute chart of my gapper trade in FCSX which gapped up on earnings this morning. After gapping wide it consolidated the gap on declining volume and formed a triangle. I took a dummy long entry as price broke the triangle to the upside. Price quickly took out the ORH on accelerating volume and I thought I had a big winner on my hands. After breaking the ORH, price started to consolidate at the round number level. Suddenly I noticed a bearish tweezer top forming, so I tightened the stop to the ORH (blue line). As you can see from the chart there was a gap down at my stop so I suffered a lot of slippage. FCSX has an incredibly wide spread to begin with so its not for everyone. Lesson learned - careful when trading stocks that report earnings before the bell as opposed to AH. Conference calls can be very inconvenient to day traders.
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7 comments:
Jamie, just wondering how you would have traded SWIM today on the 15 minute? I ask because lately I keep finding what look like perfect set-ups, that I get stopped out on.
SWIM looked like a picture perfect Trader-X setup. After the sixth bar closed above the ORH, I went long on a break of the sixth bar high, but was then stopped out on the tenth bar. Any suggestions on how I could have trades this better? Any comments will be appreciated. Thanks
Hey Mark,
Sorry to hear about the stop out. I doubt that I can make suggestions about how to trade a Trader-X setup better, but I can offer you a few tips on how to manage the trade.
Firstly, before you enter a trade I strongly suggest that you look at the daily timeframe to see where the stock is coming from and where its going. The daily chart of SWIM says that this is a stock that is pushing up from a deep retracement. It had a big move yesterday and today it's trading on momentum. The pivot point resistance is $12.00. All this to point out that you might not want to enter a stock at $11.69 if the target is $12.00.
Having said all that, I know that most gapper traders don't look at the daily when they see a picture perfect Trader-X setup. :)
One observation to make is that there are no red bars upon your entry. So sooner or later, SWIM is going to consolidate. Upon completion, the entry bar is a red doji star with a long upper shadow. So this tells us we are going to consolidate this move NOW!
A normal retracement is 38%. So if I use use my Fib. retracement from the ORL to the 7th bar high, I'm looking at a potential pullback of 40 cents down to $11.37. If this tolerable, then move your stop a few pennies below that level and pray. If not, try to sell a portion of your shares at break-even and move your stop below $11.37 on the balance. This latter strategy will keep the risk at an acceptable level, however, the profit potential is reduced. Also, watch the volume on the retracement. Volume should decline on the retracement. If volume spikes, on the pullback, it's best to close the position. For SWIM, this strategy would have kept you in the trade as it did not breach the 38% retracement.
Trader Blogger OONR7 traded SWIM today. He took a more aggressive entry. Check it out on my blog link.
Good Trading!
Thanks so much for the response! Very informative, just what I was hoping for. I've never thought of using fibs that way, I'll take that into account from now on -Mark
Jamie,
FCSX has a wishbone spread=WIDE. I stayed out. I looked at 24/7.com up/dngrades list and saw many gap down reversals like CMCO dngraded to sector outperform(hah?)+1.5, ENDP +2, RDS/A +2. Buy at a discount I guess! MRK was upgraded and kept going, PLXS, DFS. Briefing: REDF was a Victoria's Box set up. Today was candy jar time but not for me. Traded AA 11:10/5min .38/5ema stopped out for a loss! Now that really hurt. 20/20: retraced below OR .50 fib , however retraced to .62 fib yesterday's close--today's OR and reversed. Risky play 6/5" NR
BL,
AA trading up again this morning after withdrawing AL bid. NR basing at $47.00 in pre-market.
Jamie,
I should have just kept it. Retraced this am 5/5" chart doji/5ema looked good at 46.51. Late "revenge" entry at 46.75 and out for coffee. A red WRB might mean a better entry when it reverses and hits the .38 rather than the .62 from yesterdays close to OR high...like 5/5". A green WRB might be better when it hits the .62 retracement OR like SWIM yesterday. Scanned $10-30 with some good candidates: pdli glbc hov zing mmr spf.
BL,
I will have to look into the retracement trade in more detail. Gapper break of ORH - AA scratch, AMGN scratch, GPRo retracement scalp - good, MDR momo gapper stock du jour - sweet!
AMZN chart looks like BIDU last Friday, Testing recent highs - might develop into a late day B&B.
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