Thursday, July 31, 2008

Dummy Gapper Trade - Akamai Technologies, Inc. (Public, NASDAQ:AKAM)

AKAM was an earnings gap which set up a perfect 3 pivot point base & break on the 1 minute time frame below. If we look at the 15 minute time frame, it's obvious that the down sloping 5 period EMA was still quite a distance from price when the trade triggered. When that happens, I still take the trade based on the ABC/123 setup - series of lower highs/3 pivot base. I look for a wide BO bar to pull the 5 EMA down. In the case of AKAM, the BO didn't close on its lows and the EMA was still trailing, so some consolidation was expected.

I keep an eye on the 1 minute time frame to monitor retracements - the 20 ema/1 min. should hold as resistance on a successful trade. I was sort of anxious to take a partial because price never tagged the 5 EMA (15 min.), and I knew that eventually, it would. Took a partial as price approached $23.00 and was stopped out about an hour later.

After a 38% retracement of the ORH to the midday lows, AKAM carved out a shooting star on the 15 min. and set up another short. I traded it as a trend line break on the 1 min. (see last chart). It didn't produce a big move, because buyers stepped in at $23.00 again. So we didn't reach the target 38% Fib. extension of the previous day high to the ORL, but a good trade just the same.


8 comments:

Day Tradr said...

I missed AKAM setup but when I saw later I was sure, you'll not miss this excellent setup :)

I have a question, related to flags. If the flag part is equal or more than 50%, would you still enter the trade on the breakout?

I am trying to learn from your trades and have started writing a blog/journal from today. It is fully inspired by your blog and trades. I would appreciate if you would take some time and visit my blog and comment where I made a mistake and/or could have done better OR how you would have executed the trade. I invite all others to please visit the blog and provide positive criticism.

Thanks in advance.

Day Tradr said...

Forgot to mention the blog URL. It is http://daytradr.blogspot.com

Jamie said...

Day Tradr,

Thanks for the vote of confidence. I checked out your blog. I'll add it to my google reader.

There's a fine line between flag patterns and retracements. As a rule of thumb, the angle of the flag is about 30-35 degrees or less. Whereas a retracement can be very steep.

On your MA chart, I see a C&H pattern with a partial extension to 50%. When the pattern fails, it carves out 2 WRBs = flag pole. But the flag or retracement is quite steep, let's say 45 degrees. Therefore the breakout is not as fast and furious ie. no extended flag pole. It eventually gets the job done., but I would consider this setup a retracement as opposed to a true flag pattern.

All that to say, that if it retraces more than 38 -50%, it's probably not a real flag, but that doesn't mean that the setup is not good, it just means, it will take longer to achieve the target.

bl said...

Beautiful ditto with exclamation. Also 2/30" ib

Day Tradr said...

Thanks a lot Jamie. This concept is much clearer now.

I have never traded C&H but I see that you trade them quite often. I am trying to incorporate this pattern in my trading. There should be a volume contraction when the handle is being formed. Should there be a volume contraction at the base of the cup too?

I really appreciate you visiting the blog and commenting on the trade.

Jamie said...

Day Tradr,

For C&H , look for price and volume contraction as the handle forms. The MA example from yesterday was a perfect C&H on 5 min. timeframe, however, because it formed on a volatile gapper stock, it was riskier.

Normally, look for NRBs as the handle forms. Volume picks ups just as the pattern is about to BO.

Jamie said...

Thanks BL

Day Tradr said...

Jamie,

Is it advisable to avoid C&H on volatile gapper stock or it can be taken if the stock forms NRBs as the handle forms. The MA trade did not form any NRB's in the handle.

I think I found a C&H pattern today. Can you please visit my blog and check out the trade (http://daytradr.blogspot.com/). As always, I would love to hear what I should look out for, what to avoid, how I can improve.

I really appreciate your help.