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Don’t Discount Daily Charts When Day Trading
The daily charts are where nearly all my trades originate. Whether I’m looking for a single-day move or one that lasts several weeks, I always at least take the daily chart into consideration.
Day traders often forget the value that the daily chart can bring. The conclusion is that it’s only suitable for swing trading or position trading, but the truth is that the daily chart can offer some good signals for entry and exit as levels are cleared or reached. Even better, those same levels can often add to your confidence in a day trade and help you stay in it.
Let me offer 3 examples from Tuesday’s session where the daily charts played important roles. On Monday night in the member area, I listed only 3 plays for Tuesday’s session, with each of them being day trade candidates. I’ll break them down one at a time with the initial setup, and then a look at Tuesday’s intraday chart where the daily level played a significant role.
First up was QIHU, which looked poised for a push higher after establishing both a higher low and a higher high in recent weeks. The pullback over the previous several sessions provided a clean descending trend line which I used as a pivot for getting long at $23.60. Here was the original setup:
QIHU pushed past that trend line and never dealt with it again, running initially almost 3% higher before pulling back but still holding above that same trend line:
Next up was GLNG, which had corrected and then settled into a multi-week narrowing consolidation pattern in the form of a symmetrical triangle. These patterns can break either way, and with a strong market and the upper trend line being challenged, I was looking long on a trend line break through $32.15:
GLNG triggered an entry as it cleared the $32.15 level, showing a nice initial pop followed by a pullback to test the breakout zone. To heighten the validity of the $32.15 level, the low of the pullback was $32.18, just 3 cents above it. From there, it ran again in the afternoon to clear the morning highs and get 4% beyond the morning trigger. Not bad for a few hours and no pain:
Last but not least was FSL, a little stock which had huge potential. It had just pulled back to test and hold the early-August closing low, and in recent days had stabilized just above that level. On Monday it saw expanding volume but only minimal progress as it edged past a descending trend line. I set a trigger for $11.25, which would be a multi-day high, to get long. Here’s a look at the pre-trade setup:
FSL triggered late in the day with a massive thrust higher once it cleared the $11.25 level, vaulting straight up to $12 to offer a very fast 6.6%. The move was fast and furious, but a quick payoff once the level was cleared:
A couple lessons from these trades…
A level is a level. Doesn’t matter if you found it on the daily chart or some other timeframe, the odds are it’s going to be evident across multiple timeframes. Recognize and respect that, because it could pay quite well. All 3 of these trades were winners, and each of them respected the level originally found on the daily chart.
Keep an open mind. Perhaps your preference for day trades is a 15-minute chart or a 30 or a 5-minute chart. That’s great. But keep an open mind about how trades might originate. Don’t resign the daily charts to something only multi-day traders consider. You’re missing out on several great opportunities per day by ignoring the daily charts.
Hopefully you found this walk-through helpful. If you want to know what I’m trading tomorrow, stop by the site and begin your trial to our stock pick service.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Sitting Still
July 2, 1982 was a special day for Larry Walters. That’s the day the truck driver strapped 45 helium-filled weather balloons to a patio chair armed with a six pack, sandwiches, a camera, and a pellet gun to pop the balloons.
His intention was to go up and look around, but he quickly found himself terrified, having dropped his pellet gun, and over 15,000 feet in the sky in the primary approach path for Long Beach Airport.
When asked why he did it, he simply replied “A man can’t just sit around.”
Lawnchair Larry Wasn’t a Trader
There are multiple occasions when sitting still is the right thing to do in trading.
Sitting still with regard to open positions that are working is definitely a time to be less active. For instance, most of us are familiar with the quote attributed to legendary trader Jesse Livermore:
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”
Right now, we’re seeing yet another example of a time when sitting still is a worthwhile approach for traders having a timeframe outside of a couple hours. Volatility is extreme, indecision is running high, and prices are ripping back and forth ’round the clock.
Stated otherwise, it’s really hard to manage risk effectively in a tape like this. It’s a scalper’s dream, but if that’s not you, this is a time to sit still. Let the dust settle, and be patient. Big opportunities are going to result from this.
Do you just head for the couch and flip on the TV with a bag of Cheetos? No!
Work on your game. Clean out your watch lists. Study your trades. Read a great trading book. Get inspired for greatness. Practice Winning. Do anything that will make you better. But don’t just sit around.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
One For the Bloggers
Last week one of my favorite bloggers penned a post called The Bears Are in Serious Trouble. One who read that post and then saw the 512-pt DJIA decline the following day might have thought it was way off, and yet Eli was still right to publish that post.
You see, it wasn’t about making a prediction. The title’s operative word being ‘are,’ which was a present-tense fact. Stated otherwise, at the time it was still correct. To that point when his post went live, he was exactly right…the market had withstood considerable uncertainties and held inside the range, leaving the bears in apparent trouble.
Since then, we’ve tumbled considerably, to the tune of about 800 Dow points as I write this, and each of the indexes have broken down hard. That’s alright, I don’t think Eli’s post was about being correct about what would happen next.
That’s what it’s like to put out your ideas as a blogger. It’s not easy, and there are so many fine lines to walk…
You mention a good trade, you appear to be beating your chest and first in line for a big helping of humble pie. You come clean on your shortcomings too frequently and some think you aren’t worth reading any longer. You put out an idea which the market renders obsolete, and you sometimes wish you could withdraw the post. Maybe Eli felt that way, but he held his ground and I respect him for it. He stepped out to make an observation, and while it is no longer the case, he was sharing what he saw as a trader.
I personally know it’s not easy to be a blogger. I’ve been blogging since January 2005, and here at TheStockBandit.net since December 2005. Over the course of some 600 posts, I’ve made my share of good calls and complete whiffs. I’ve pointed out names which looked good right before great runs, and I’ve pointed out others which completely flopped. I’ve received many kind emails from readers expressing gratitude for my efforts, and the occasional knucklehead has told me how stupid or wrong I am (and yet they’re reading).
But you see, I’m not here to declare my ownership of a crystal ball – and neither are any of the great bloggers out there you’re reading. They’re sharing their thought processes as traders with you, putting their current opinions on the line, offering insights into their views of what’s taking place, or sharing a trade they recently made which netted them some dough or delivered some education. If the bloggers you read are writing in that light, then respect them for it!
As a reader, keep this in mind: a good blogger is putting out a flow of ideas for your benefit.
Learn from what you’re reading, and right or wrong, give them your appreciation for their effort. Shoot them an email, leave them a comment, share links on your favorite social platform (StockTwits, Twitter, Facebook, etc.), because if it’s worth your reading it, you probably know several others it will also benefit.
And to my homies puttin out quality content, keep on doin your thing!
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Embracing Market Changes
The market is ever-changing, both in what it fixates on and in how it moves. At times it’s earnings, at other times it’s politics, and still other times it’s the economy. Sometimes it sprints, sometimes it crawls, and sometimes it jumps back and forth across the same line to get nowhere.
As traders, it’s this constant change which actually provides us with serious opportunity. The long-term buy-and-hope type doesn’t have a different approach for profiting from a momentum market vs. a sharp correction. You as a trader do, so embrace that!
When it’s time to adapt, be willing to do it. The same old patterns might not work, so at times you’ll need to modify what you’re looking for and go with something a little different. Experience will teach you this, but right alongside that is your ongoing willingness to listen to the market and identify what’s working.
I want you to check out this post from the archives where I talk about Profiting From Market Changes – you’ll learn from it.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Let Your Trades Go
Trading on certain timeframes requires that we monitor every tick, gauge the momentum, and continually modify our management of the trade.
For most traders, however, more of a hands-off approach is far better. Whether it’s a job that prevents fixating on the screens, or simply an aversion to that high a level of activity, many traders choose to operate on a timeframe that doesn’t require their nonstop full attention.
When I’m swing trading, there’s a tool I utilize that makes all the difference in the world. It allows me to take a set-it-and-forget-it approach to my trades so I can set them up and let them go. It helps me prevent interfering with my positions so that my original trade plan can fully develop.
Just as you should, I already know from the outset of my trade what I’ll risk if I’m wrong and where I’ll ring the register if my target is reached, so with those pieces of the equation already known, all I need to do is plug them in.
Read this post for an explanation and a video I made explaining how I trade with Peace of Mind.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Pro’s Are Patient
The British Open is my favorite major to watch. It requires so much of the players, from execution to mental toughness to using their imagination to get the ball in the hole. Plus, it happens in July when it’s 147 degrees here in Texas, and I like to disappear into the home theater where it’s cool and dark and watch the guys wearing sweaters as they fight the sideways rain squalls!
In watching yesterday’s final round, the leaders were each asked during their pre-round prep what the most important element would be for their game in the final round. Without exception, they all said the same thing: Patience.
Experience taught them that. Eventual winner Darren Clarke was quick to admit he’s not normally a patient person, yet that was his focus as he headed out to try to claim his first major title.
A little gray hair goes a long way.
Had it been an interview with amateur leaders of the local club championship, the answers given may have been along the lines of “I need to make a lot of birdies.” And while that may be true, it’s not the priority of a pro when conditions are less than ideal.
True Confidence
Patience is not my strongest suit. I’m aware of it though, and therefore continue to keep impatience in check. I have to work on it. Self-honesty is important though, so I can’t ignore the occasions where impatience costs me opportunity, and those in turn serve as reminders to wait for the best opportunities to come along.
Through my premium service, I encounter a lot of traders who are overly anxious. Impatient doesn’t even begin to describe them. They’re willing to throw caution to the wind just for the thrill of being in something.
Or to avoid looking scared.
I think they fear it’s a show of cowardice if they sit on the bench for a little while. Ironically though, the biggest sign of confidence that you know what you’re doing is having the guts to sit on your hands when you don’t see what you like. You don’t chase the wind – you have a plan, and you execute it when the time is right.
Instead of taking that approach, these highly impatient traders don’t realize the primary importance of preserving capital and the secondary aim of turning a profit. Instead, they want to be highly active every day, and it’s as though they’re missing out if they exercise some caution. I don’t mind telling them that my service isn’t the right fit for those who feel the continual need to be in something.
Wait For It
The fact of the matter is that there are times when the sidelines are the best place to be. Just like the British Open leaders identified the greatest virtue of the day to be patience in the face of harsh weather conditions and tremendous pressure, you as a trader have to recognize when patience is the best course of action for you.
You’re still agile enough to take action should conditions present an opportunity, so it’s not as though you’re immobilized or stuck like a buy-and-hope investor type. But when the market is overly sensitive to the news flow, we’re getting huge gaps on nearly a daily basis, reversals are happening frequently, and the setups are sparse, the best course of action is to take very little to no action.
We all know the oft-used quote from Jim Rodgers, but it’s this kind of attitude I’m referring to…
“I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, ‘I just lost my money, now I have to do something to make it back.’ No you don`t. You should sit there until you find something.”
If you’re predisposed to trading the long side, then wait for market weakness to dissipate before committing capital. If you like the short side and we’re seeing relentless rallies, the only thing you’re missing out on by not trading is pain. Recognize that and embrace the option of doing nothing when what you see doesn’t fit your skill set.
Professionals know there are times to lay low and wait for the best opportunities, but amateurs tend to force the issue out of impatience. Which would you rather be?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Stretched is an Understatement
To say the run of the past two weeks has made the market stretched to the upside is clearly a major understatement. It’s been a face-ripping rally for anyone caught on the short side, while underinvested bulls gnash their teeth in nearly equal frustration.
It’s been a tricky environment in recent weeks, yes, but there is still opportunity if you search for it. The momentum run has offered some nice day trades, even if it has left many stocks overbought on the daily charts. Even a few days of rest would do wonders for those charts.
Speaking of rest, this market is poised for it, but will we get it?
The reaction to the jobs number this morning offered the perfect sell-the-news scenario as extremely overbought readings (no matter how you gauge it) left the market badly in need of some profit-taking, some lateral price action, or both. While the result of the turn lower this morning remains to be seen, we do know this: the buyers are finally standing aside to take a breather at the very least.
Thankfully, as short-term traders we don’t have to predict what’s going to come of this market in the next few days. What matters is that we continue to work the charts and trade what’s right in front of us.
With that said, a pullback here for a few days or even some short-term trading range price action would help to establish some new patterns and bases from which to take multi-day plays, one way or the other. That may not mean excitement for a few days (if we do get a rest), but it would certainly mean greater opportunity on the other side of it. I, for one, am excited about that possibility.
Those who have walked away for the summer have already missed considerable movement, and yet the market promises more going forward. Are you ready for it?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
