Featured setups from Monday February 14, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Keep this in mind: There were a large number of narrow range bars put in on the daily charts of stocks yesterday; following price contraction comes price expansion – and we hope to the upside here, continuing the direction in hand.
However, the biggest risk here is that markets wiggle up a little at or near the open, only to fail for the rest of the day.
There is no easy way to mitigate this risk – but here are the approaches:
- If the market opens with strength, but not huge strength, wait for the first retracement to show up intraday off a 5 but ideally 10 or 20 minute chart and place buy your buy stops above the retracement, near the trigger value (i.e. do not follow price deeply down into the range of the prior day).
- If the market screams up, there may be no choice but to buy near the trigger value. In this case since our premise is that the market is not pausing, you must place a protective stop near your entry price as soon as possible. If stopped out it may simply be that you’ve misjudged strength and have to lurk above the retracement, but its best to exit, and try again, rather than to hold on only to see price put in a 180 degree reversal.
We’ll no doubt talk about this in TrendVue Trader Talk today.
Entry and Exit Strategies
Entries: Each chart posted includes the TrendVue High/Low indicator in the chart legend, showing the high and low of the prior day. We refer to these values frequently for setting stops, alerts and initial protective stops.
Our trade entry methodology stresses that price should prove to us where it wants to go, consequently all of our setups involve placing entry stop/stop limit orders where a trade will be initiated for us automatically, if price is able to move in the expected direction.
When price does not comply, we evaluate the setup to determine if it is either a) an expanding pattern or b) an invalidated setup. For example, a 3 bar bull flag setup that does not trigger can be followed up the next day with a buy stop above the new 4th bar, provided that price doesn’t invalidate the bull flag pattern.
Exits: Once in a trade, we must place an initial protective stop as soon as possible. Consider this stop your crash stop – an emergency measure which you hope will never get used, but is there for your protection in case you lose all connectivity to your broker or some other unforseen event takes place. The initial protective stop, unless noted otherwise, is always at the opposite end of the bar used to trigger a trade.
For example, if our trade setup for a long trade is based upon a break of yesterday’s high, we will use yesterday’s low as our initial protective stop.
The next task for us, once in a trade, is to find the earliest reasonable opportunity to move stops up. Trade and risk management is a highly personal topic; we can only relate to what works for us. In general, once a trade is substantially profitable, or has started to trend on a 10 or 20 minute chart intraday, I move to a break-even stop immediately.
Once the trade has surivied its first day, we are already on watch to look for our profit exit. Here your personal objectives come into play. A longer-term investor using swing trading techniques to improve entry and exit will tend to give a trade some room. Our recommendation is to use the break even stop until the stock starts to trend (higher highs, higher lows or the reverse in a down trend).
Short term swing traders will tend to use price extension estimates and pre-place exit orders at these estimates. This discussion goes beyond the scope of our daily swing trade service, however we are happy to entertain questions in TrendVue Trader Talk on any subject.
Long Setups
General common strategy: Unless noted otherwise, buy stop just above the “high” value, with an initial protective stop at the low value of the bar, not below the bar.
Retracement or Pause in Up Swing / Up Trend
EMC – graced these pages last week, a difficult stock to buy on Friday but there were plenty of others. Buy stop above yesterday’s pause, and we’d like to see EMC clear the prior swing high before considering holding overnight.
CIEN – bull flag following a bounce after the gap fill.
CLS – bull flag
Short Setups
General common strategy: Unless noted otherwise, place a sell alert at or just below the low of the setup bar, and look for the first failed intraday bounce after the low has been broken. What we are looking for is price to push down, bounce a little, and fail again – this is where we want to get short.
Retracement or Pause in Down Swing / Down Trend
TYC – probably best to use the two day low as a trigger, aggressive traders may wish to use the inside bar for a head start.
Special Situations
JNPR – a messy bottom being put in here, with potential selling exhaustion shown over the two weeks. Buy stop just above yesterdays high and price must clear the 2 day high before considering holding.
ANDW – in the “special” section because the retracement has aged; however its filled the gap and leaves a tiny bar to lever a long off of, aggressive traders who like stops only.
05.02.15 09:29 #