Wednesday, August 26, 2009

Technical Picture - Narrow Range Chop

After a weak start the markets got a boost from better than anticipated new home sales, however, failed to follow through with much of the session spent in narrow range chop. That leaves us with NR7 (price/volume contraction ) on the daily. Tomorrow's pre-market economic data should set the tone with initial claims, prelim. Q2 GDP and core PCE at 8:30.

As noted earlier in the week, V is carving out a Cup & Handle pattern at $70.00. Yesterday it formed an intraday base at $69.00. Today I decided to place a buy stop order on a break of PDH for a target trade to the C&H base. Price consolidated midway to the target, but held support of R1 (not depicted), eventually reaching the target.

MYGN was my gapper trade. It formed a C&H which broke late in the session, but the extension was really lame. Bullish island reversal on the daily could develop some follow-up trades.


Tom T. said...

Hi Jamie - hope you could comment on AIG today (8/28) I watched NR7 form on the 15 time limit and it had the widest red body of the morning but I could not predict which way it would break. Would you have even attempted to trade this breakout and would you just wait for the 8th bar to take out the high or low of NR7 before getting in or how would you decide when to enter and predict the move?

TJ said...

Hi Tom,

Yeah, I was watching AIG Friday, but didn't trade it. Too tough to call. I traded it Thursday and was expecting the momentum to continue. But like you, I couldn't tell which way it would break so I decided to move on to something else.

The Trade-Ideas scanner which counts NR7 on a continuous basis, signaled NR7 on the 10:15 bar and again on the 10:30 bar followed by a pause and again on the 11:00 bar which was the narrowest bar of the morning. According to my Esignal chart, the first and third NR7 bars are red and inside and the second is a doji (open and close at the same price), not inside. The slope of the highs looks like a pennant. The way I would play it is to wait for the upper or lower shadow of either of the two previous bars be taken out. In other words, trade it like a pennant BO.

Day Tradr said...

Hi Jamie:

Do you use Time and Sales? If yes, any tips on how to use it effectively?

Miss your trade posts. Hope you are doing well.

Day Tradr

Day Tradr said...


17th bar was a bearish engulfing candle and looked like price failed to take out $69.60 on second attempt. What was the reason for not taking partial there? Is it because it was also an inside bar (within 6th bar)?

TJ said...

Hey Day Tradr,

I think you answered your own question. It is tempting to take a partial there, but V was still in a pattern of higher highs and higher lows. I was hoping for a 3 pivot point B&B and I felt that if the 20 EMA provided support, I had a good chance of not being stopped out.

TJ said...

Day Tradr,

I don't use time and sales in liquid markets. The only time I find it useful is in after hours or overnight futures trading.