Thursday, August 07, 2008

Gapper Inverted H&S - DryShips Inc. (Public, NASDAQ:DRYS)

DRYS gapped down and carved out a perfect inverted head & shoulders with sloping neckline. I noticed that GNK and TBSI were ripping lower on my TI scanner so I decided to look at DRYS for similar weakness. Took a partial at S1 and held the rest for a full 100% Fib. extension from the top of the head to the BO point.

AMGN was a HCPG pick for a base break at $64.00. I took an early entry based on a mini B&B and NRIB on the 5 minute time frame. I added to my position on the actual BO. As you can see from the chart, the BO failed and the trade was stopped out. I was waiting for the failure to set up a bearish flag, but price just meandered and eventually retested the reaction swing highs. Still it couldn't get any traction and eventually pulled back. As it traded sideways in a narrow range just under the BO level, it carved out a 3PP base, setting up a low risk short. I had no idea that it would crater to such an extent, but was very happy that I had kept coming back to it. Remember that failures can lead to fast moves in the opposite direction.

13 comments:

Anonymous said...

Right place, right time on AMGN. I too would not have expected that move.

Jamie said...

Hey Jim,

Yeah, I'm not a revenge trader, but some of these failures really break down. AMGN was well worth the wait.

Anonymous said...

Hi Jamie,

Just wondering if you use tick charts with your day trading, and if so, how?

Hope all is well.

Formerly ADD Trader

anarco said...

Nice ride on AMGN!
Did you actually set the stop at 63.91 or 64.00?
Thanks.

Jamie said...

Hey ADD,

No ticks charts. How are things?

Jamie said...

Anarco,

There was a solid base at $64 and a clean support line at $63.91. My stop was $63.89, two pennies below support. AMGN broke out on big volume and I had no reason to suspect that it would fail, until it did. Look at the 1 min. time frame and you'll see that it happened very quickly.

anarco said...

Sorry, I actually meant to ask you what was your stop on the afternoon short (AMGN).
Thanks.

Jamie said...

No problem Anarco,

Yeah, I traded it on 1 minute chart - $63.91.

yr said...

Hi Jamie,
AMGN: Why not enter on break of PP at 3pm ET 5min bar? I believe your entry was break of 3pm bar low?

YR

Aimable said...

Hi Jamie,
Where do you see DRYS heading for next week?
Thanks!

Jamie said...

YR,

See my PCLN post a few days ago. I explain how to wait for consolidation at the base. I don't like to take the entry after 3 consecutive red bars on 1 minute, so I wait for price to consolidate and then enter. It's no big deal on AMGN, but on higher priced stocks, it helps lower the risk.

Jamie said...

Aimable,

DRYS currently testing its trend line. A close below $65, leaves the door open for further down ticks. Next support level is $60.00

Aimable said...

Thanks Jamie!