Day Trades - TCK, CLF, TBL

Bear flags have been hit and miss in this market. Mostly they've been fake outs. So why was TCK a good short? From the daily chart above, we noted a huge volume spike on the Feb. 9th drubbing. So we see a huge red stick with volume, plus bear flag with NRIB observing the downsloping 5 ema as resistance closing at the base of support. This bear flag felt like it could work.

Small size on break of $58.00 and added at the first consolidation BO. Took a partial after 3 consecutive WRBs on 15 min. timeframe (not depicted). Got stopped on balance as price capitulated into $56.00 and bounced.

CLF gapped up on earnings. Price chopped around in the first hour and then started basing in an increasingly narrow range, forming a flat base at $99.50, and setting up a gap fade.

Price breaks down, retests the base and runs lower for 3 consecutive 15 minute bars. Take a partial as price approaches $98.00. CLF snapped back sharply. I thought the second half was going to get stopped out at BE, but, it came back down and I was able to salvage a decent profit on the second half.

Looking back at the 15 minute chart, there just wasn't enough volume expansion on the initial leg lower to expect continuation.

TBL was another earnings gap from the Trade-Ideas scanner - gap up min. $1.00, RSI on 15 minute timeframe minimum 60.

TBL gapped and ripped then spent most of the rest of the session in a tight narrow range. Normally, I like to buy the BO of the upper range, but time was of the essence, so I decided to buy the bounce off of the bottom of the range, then if the BO failed, I would have some profit from the trade. Turned out to be a good strategy as price/volume expanded into the close. The base BO also set up perfectly with a low risk NRB on the 15 min. timeframe.

Entry and exits depicted on 1 minute chart below.

Q&A - Risk Management

Q. Jamie, Love your trades! You make it look so easy! I have a question for you in regards to risk management. I was also watching POT the other day for a break of 105 but didn't like the risk associated with taking the entry off of the 15min candle with a stop below that=94 cents risk. So I didn't take the trade. When price breaks such a major level like that are you buying the break of the level with a stop at the base of the 15min candle that's forming or are you dropping timeframe and managing risk off of the 5min candle? I know you like to see a candle close strong before entry.

A. There's no guarantee that we will get a NRB at the base prior to BO, so it's a good idea to size up the potential risk ahead of time. You can mitigate risk of loss in a number of ways. Here are two examples.

Option 1 requires looking for a mini base within the bigger base. This way you can possibly get a head start, and secondly, if the bigger base fails, you have time to scratch the trade and move on to something else.

Higher priced stocks frequently require wider stops. I like to look and the underlying price action of higher priced stocks such as POT, before committing money to the trade. Ideally, you want to see price and volume contraction during consolidation and expansion as price moves into the base. You can't see that on a 15 min. chart, so it's a good idea to drill down. Subtle hints on the 1 minute timeframe can often alter your confidence level in the setup.


Option 2 works well when the base is wide ie. price travels far to get to the base, so it has to consolidate shortly after the BO. But don't expect this to work on a tight narrow base. You risk missing the trade if you employ this strategy on a narrow base such as the handle in C&H pattern.


Q. I was also watching GS for a break of the 175 level but was uncomfortable with the risk that setup gave me as well. I did enter the break of the bear flag that day but missed my original entry idea because of the confusion as to where to put my stop. If price consolidates at a major level than it's not a issue where to put my stop but if price blows thru a major level and is extended from the last consolidation what's your stop placement rules on that scenario? Thanks.

A. I see the base at $175.50 as opposed to $175.00. The bear flag forms at gap support and the target is a gap fill. The setup is somewhat risky in the sense that it prints two dojis (indecision) prior to breaking. The bear flag is a pause prior to the attempt at a gap fill. If you don't see the whole picture and are unsure of the target, you are wise not to take the trade.

Trading NRBs - Flowserve Corporation (Public, NYSE:FLS)

I was away for the first hour and half of the trading session. I couldn't believe the blood letting when I came back. Anyway, on days like this, I just stick to the overall trend and wait for something to jump out at me. FLS couldn't find a bid today. I was waiting for a NRIB, but this was close enough. Look at the 1 minute chart and you can tell that this flat base is going to break down. FLS has a huge spread which causes a lot of slippage. In cases like this, and given the tight candlestick formation, I prefer to get in position before the actual break.

Gapper Dummy Trade - Nordson Corporation (Public, NASDAQ:NDSN)

Price/volume contraction ahead of expansion.

Dummy Gapper Trade of the Day - Canadian Solar Inc. (Public, NASDAQ:CSIQ)

CSIQ was an earnings gap from the Briefing.com gapper list. Not sure where they came up with the name as this is a Chinese co., not Canadian. Anyway, after gapping up, it traded sideways until price and the rising 5 period ema came together. After carving out a NRB on very low volume, price started to expand. I went long before it took out the ORH - mini B&B or a base within a base. Once the ORH was taken out, it ran up quickly to the 50% Fibonacci extension level of the previous day low to the ORH. I locked in a partial and I was stopped out on the balance as price started to retrace following a star with a long upper shadow.

Dummy Trade of the Day - Sigma Designs, Inc. (Public, NASDAQ:SIGM)

From the watch list, SIGM broke $49.50 on the open. This was the area where price was basing most of the day yesterday. After a false start, price retraced back to the base on low volume and set up a bullish shallow rounded B&B pattern. Price easily took out R1 and R2 and continued higher until midday. I closed my position on confirmation of a hanging man. Price retraced back to the upward sloping 20 ema and setup a late day scalp as price took out the high of a hammer-like reversal bar.

Slow, choppy day for the markets with very few good trading opps.

Dummy Trade of the Day - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

I missed the morning session so I stuck with low risk NR7 (POT) and inside bars (DRYS) to trigger a couple of short entries. My DRYS entry was a little late (under $97.00). POT was a little tricky on the exit as it took out R2 easily but then started to consolidate so I took a partial and moved my stop above the previous bar high. The DRYS exit was easier because price bounced after taking out R2, plus I had 3 WRBs.

Dummy Gap Fade - Guess?, Inc. (Public, NYSE:GES)

GES was a gapper from the Briefing.com list this morning. It capitulated after three WRBs and carved out a tweezer bottom reversal pattern. After a Fib. retracement of 25% from the previous day high to the 3rd bar low, it consolidated for about an hour forming a mini base. Dummy long on break fo NRB at the cusp of the base. Price retraced past 62%, to conveniently tag S2.

Watch List Trade of the Day - Cummins Inc. (Public, NYSE:CMI)

I sort my watch list by % change after 10:00 and review the charts of the biggest gainers and losers. Nothing on the losing side caught my eye, but on the gainers side, I really liked CMI and DLTR because they had gapped up and were trading above the previous day's range. I ignored some of the other names like FSLR because it was too extended. CAL was also in the top 10 but retracing the early move so I set it aside.

The first chart is a 5 minute timeframe of CMI. I entered long on a break of the ORH following a bullish green hammer.

The second chart is a 15 min. chart of DLTR with a very bullish ascending triangle pattern at the base of the ORH. I exited DLTR when price stalled just below the 38% Fib. extension of the previous day low to the ORH because the BO was taking place on declining volume and I felt it didn't have legs. When price took out morning resistance I re-entered following a NRB.

Both CMI and DLTR were above R2 when I entered the trades. On the daily, both had NRBs on Thursday, (CMI looks like NR7).



CAL eventually broke out of an ascending triangle pattern and had a nice, quick run up. Notice how it held R2 as support on the retracement and ran up even higher.

Intraday Pivot Point Trading - Riverbed Technology, Inc. (NASDAQ:RVBD)

Look for stocks that are trending up or down. For longs, when price carves out a NRB on PP support with convergence of 5/20 MAs, look for a low risk entry. If price stalls at the next PP level, start booking some profit and move stop to breakeven.

For shorts, looks for stocks that cannot close above the downsloping 20 MA and then find your NRB.

Dummy Trade of the Day - Apple Inc. (Public, NASDAQ:AAPL)

I took a long entry on AAPL on a low risk, narrow, base break midday. It started out very well but reversed abruptly. As price fell below $125.50 volume started to pick up, so I quickly tightened the stop to $125.00 and was taken out. I perused Briefing.com to find a reason for the reversal but everything seemed on the up and up. However, the lack of any new products or big announcements at WWDC seemed to be putting a negative bias on the stock. I waited for the next 15 minute bar to complete itself and decided to short AAPL. I only took a small position, because knowing AAPL, they could be saving the best for last as the presentation was ongoing.

Guess not, the stock continued lower, slowly at first, but on increasing volume. I took a partial as price swooned into my third level PP. After a brief consolidation, it continued down to my fourth PP where I covered the balance and went long. The late day long was a waste of time as AAPL barely bounced into the close.

Compiling the Watch List

My primary source for compiling the active watch list are stocks that gap up (down) on very high volume, usually be not exclusive, to earnings. These high volume gappers generate momentum and can spawn many follow up trades after consolidating the original gap.

My current watch list includes names such as AAPL, AMZN, CREE, CROX, CWTR, BIDU, CMG, ESRX, FWLT, JCOM, NTRI, RVBD, THE, VRGY, WINN on the gap up side and AMGN, DRIV, NTAP, GROW, SMSI on the gap down side. Since we have been in a bull market for quite some time, many of the gap downs turn into bullish plays shortly after gapping down (eg. AMGN, GROW).

A stock that gaps up or down on 3-4 times average daily volume can be a momentum play for many weeks and months to come. Some of the weaker sectors, however, will not result in as many trades. The semis, for example, have not been able to extend their gap momentum beyond a few days or weeks at most - VSEA, LLTC.

Here is an example using CMG which I traded as a gapper on the day it gapped up and have since traded two more times on NR base breaks as highlighted on the daily chart below. If CMG recaptures its PP at $85.00 it could setup another long daytrade. A break of $82.50 on weakness could setup a short, depending on market conditions.


I look at the daily and 15 minute timeframes of all my watch list stocks every night and set alerts as required if they are well positioned to move.

The rest of my watch list comes from frequent EOD scanning. For long candidates, I look for stocks trading above the 10, 50 and 200 DMAs combined. From a 4 month view, I look for stocks that are basing and ready to break, ideally from NR bars. I'm not interested in perusing lists of more than 100 stocks each for the NASDAQ and the NYSE, so I add filters for volume and momentum (ADX) to reduce the size of the lists as required.

During pre-market, I monitor the watchlist stocks for movement in the direction of the base and break pattern and I look for new gappers trading on heavy pre-market volume.

Dummy Trade of the Day - QUALCOMM, Inc. (Public, NASDAQ:QCOM) Long / Continental Airlines, Inc. (Public, NYSE:CAL) Short

QCOM gapped up on the open and carved out a WRB with a long upper shadow. After an orderly pullback to the rising 5 period EMA, the fourth stick printed a NRB with a lower high. I went long as price took out the high of the NRB. I took a partial when price retested the OR high and I was stopped out about an hour later just 5 cents below the OR high.

CAL was a short entry on a break of the OR low. I covered too soon because the afternoon session was somewhat choppy. At the time, I thought we were going to rally on a bullish candlestick reversal pattern. False alarm.

NASDAQ Technical Picture - Groundhog Day

Another NRB for the NASDAQ as it sits on resistance. The markets and tech sectors were mixed. CSCO reports tomorrow AH and Fed chairman Bernanke is scheduled to give a speech tomorrow afternoon. Maybe that will stir things up a bit.

NASDAQ Technical Picture - Low Volume NR Trade

Another low volume, NR day on Friday. Good setups were hard to find but some of my momo favorites rallied nicely intraday - GYMB, RIMM and ICE.

We need a catalyst to move the NAZ out of this trading range which has been in play since the tail end of November. Looking at the ADX line (which confirms the lack of momentum), we can see that it peaked in the third week of Nov. , swooning at a 45 degree angle through the early part of December, and flat lining from there.

The economic calendar is unlikely to spark the market this week as it is very slim - ISM Services Monday at 10:00 and nothing on Tuesday. The earnings calendar is a little more interesting and includes CSCO on Tuesday, AKAM Wednesday and BRCM Thursday.

Dummy Trade of the Day - NVIDIA Corporation (Public, NASDAQ:NVDA)

Today's market gap up was a screaming fade as the NASDAQ and Q's hit a wall of resistance on the open. The first pullback felt like it might rally but just ended up chopping around. Lunch time became the prime opportunity to look for a low risk entry on a weak stock. There were several candidates but I finally went with NVDA because it consolidated the first leg down in a tight narrow range as it waited for the downsloping 10 period MA to catch up to price.

Watch List - U.S. Global Investors, Inc. (NASDAQ: GROW)

The sell off in GROW looks a overextended. Friday's NRB at support hints of a potential retracement back up to the MA crossover level. Positive divergence of the RSI is quite evident on the 15 minute timeframe.

NASDAQ Technical Picture - Narrow Range Snooze Fest

Yesterday, I mentioned the importance of catching and holding the 50 MA on the 15 minute timeframe. Today's open was promising, but then we ran into the 200 MA and couldn't move higher. I'm glad I wrapped up my trading during lunch, because the second half of the session was a real snooze. Watch minor support at 2425. A decisive break of support could give us some tradable bearish movement. I'm still looking for a technical bounce at 2400.

Economic calendar: Initial Claims and GDP Final 8:30, Leading Indicators 10:00, Philadelphia Fed 12:00

Dummy Trade of the Day - MasterCard Incorporated (Public, NYSE:MA)

MA pulled back to support (blue line) and the rising 10 period EMA in an orderly fashion in early trade. I entered long just as price was approaching $97.00. MA rallied hard from $97 to $99.00 in less than 30 minutes. Once price was firmly above $99.00, I moved my stop to $99.00 to protect my profits. I was stopped out shortly thereafter. My second entry was a low risk dummy entry as price lifted from support of the 10 period EMA following a NRB midday. I was well aware of the negative divergence of the RSI on the 5 minute timeframe and decided to take my profit at $99.00 as I was fully expecting a lower high. That's exactly how it played out and I was happy with my decision. These were my only trades today.

NASDAQ Technical Picture - More of the Same NR Chop

Yesterday and today were NR days with lots of fakeouts and failures. I'm cautious about trading just one timeframe under these circumstances, so I'm keeping a wide range view of the 60 minute timeframe as well as the 15 minute on my screen at all times.

Today was a mixed bag for tech with no big winners or losers. Expect more of the same chop until Friday's jobs data. Initial Claims tomorrow at 8:30.