Tuesday, March 15, 2011

Technical Picture - U.S. Markets Rebound from Japan Meltdown

The U.S. markets gapped aggressively lower on the Japanese meltdown overnight following nuclear power plant fires. Buyers stepped in as the S&P came close to 1260 support, a key level I noted in my last post. This level corresponds to the 2010 highs, an area we based at for the last seven sessions of 2010. Volatility spiked as depicted below.

Swing Trades

Buying support on the open isn't easy, so I decided to to take some of the nail biting out of my support strategy by trading from my swing account rather than my day-trading account.

HCPG gave us POT $51.00 and I also liked POT $50.00, so I wanted to buy somewhere in between.

In the end, I hesitated and decided to go long weekly S1 which is much closer to $51.00. I took a partial midday.

I was looking to hold my partial swings overnight if we made a higher high than yesterday on decent volume, otherwise we're just on a path of lower lows and there's no point in taking the extra risk of a swing. So POT took out yesterday's high intraday, and we'll see what happens tomorrow.

I'm three for three with SU, but still not holding overnight because we keep printing lower highs and/or lack of volume.

TCK breached my initial, narrow support target on the open, so I decided to put this name aside and wait to see how things develop.

I took TCK long on a NRB, low risk, entry as depicted below. I took a partial at resistance, but it just kept on going on accelerating volume, which was perfect for my swing strategy.

Dummy Day Trades

For daytrades, I've been trading the old standby - low risk, dummy trades over the last two days. I look for stocks that gap with volume. Not too hard to find these days.

SHAW is a contractor with several nuclear power plant contracts set to begin in the U.S. and China. Following news of the Japanese nuclear disaster is gapped down wide on Monday. Two really nice trades yesterday and one today as depicted below.

I take all the high volume pre-market gappers and first hour pt. gainers/losers that catch my attention and create a symbol list in my Trade-Ideas scanner which I run the 15 min. NR7 scan. NR7 signifies price/volume contraction (narrowest price bar over last 7 bars) and foreshadows expansion. For longs I want price, to close above 5 EMA (pink line) and for shorts, below 5 EMA.

MCP printed a few NR7s and carved out a NRIB (narrow range inside bar). Took it long on break of small handle or base. My target was a retest of the intraday high. Not very fond of MCP as it can get really erratic at times, so just take the money and run.

Also traded PEP ( not pictured) NR7 plus hammer, but it went nowhere for a scratch.


James said...

Hi Jamie,

I also use the 15 min chart but I wanted to post something that I thought was worth looking at.

Today (3/17) I made two entries both on the 2nd green bar. I entered HPQ and TSL on an inside hammer bar that closed near the top of the OR and both had support from the 5 ema.

Upon entry, I felt that TSL was a stronger setup because the 2nd bar closed very strong while HPQ closed with a tail. It turns out that TSL stalled out and reversed while HPQ ran up into FE for the full gain.

In hindsight I would have entered both still, but I dont see how HPQ was the better setup than TSL or why it worked and the other one didnt. Any thoughts?

TJ said...

Hi James,

The only thing I can add here is that TSL was extended and testing the weekly pivot R2 at $28.71, whereas HPQ crossed above weekly pivot S1 on the open and had a lot more room to move.