All Entries in the "chart patterns" Category
Intraday Extremes Offer Big Opportunities
July 20, 2010 at 9:02 am
The old adage says to ‘buy low and sell high.’Â That’s misinterpreted by most, as they tend to sell their strongest stocks when strength is still present or buy before corrections are completed.
To the inexperienced, it may look like the move is done, but often times is followed by an encore of sorts. Timing is everything, indeed.
Extremes can really pay quite well. When fear is at its highest, it’s a great time to get long. And when everybody and their mom is making money, it’s certainly time to raise cash. But for the sake of this post, I’m not talking about buying a “generational low” or calling a long-term top in the market. In fact, I’m not even referring to the daily timeframe here.
I’m talking about how some of the best trades will happen at extremes…
…the kind which are found intraday.
Profit Where Others Fail to Look
Define it however you like, but at the heart of it, an extreme is approaching quickly whenever a move is unfolding at an unsustainable pace.
That might be a parabolic uptrend, or intraday capitulation. An extreme is a price spike which is showing exceptional momentum now, but the enthusiasm is beginning to fade, and soon there’s going to be a reactionary move.
That reactionary move is the one you and I can catch most often. I say that because once we see a stock that’s really on the run, the odds are that the easy money has been made for that particular move. Attempting to join the move means chasing price without a clear-cut exit plan, and that’s a huge no-no for any professional trader. So, the reactionary move is the money train for those who missed the original move.
What’s so funny is that most traders see a huge intraday run and just know they missed it. Don’t be as closed-minded as them. They drool over what it would have been like to be on board, and fail to recognize the opportunity that’s about to unfold. Dare I say, a more defined-risk opportunity.
You Missed the ‘Move’ – So What?
Take Monday for example. Education stocks bolted higher in the morning, ripping through offers on the way up as they painted the tape bright green. By the time most of us noticed them, they’d already put up very impressive gains.
Maybe you saw APOL, ESI, COCO, DV and others up in the neighborhood of 10% in just the opening few minutes. It looked like they could keep going, but suddenly the buying frenzy morphed into profit-taking, and thus, opportunity arrived.
RIG provided an excellent move for me (from Sunday night’s premium newsletter), but my most profitable trade of the day actually came in a short sale of ESI. Let’s take a look…
ESI ripped higher by $9 right off the open Monday, but I wasn’t long. It was up about $6 by the time I noticed it, and I’m not a buyer of that kind of strength. So instead, I waited for the enthusiasm to wane. And shortly after, it did.
The stock had painted a high of $95.62, and then backed off slightly. It spent several minutes consolidating, and then on the 3-minute chart I saw something noteworthy. I shorted at $95.10, set a protective buy stop up above, and waited to see if profit-taking would develop.
An hour later, the stock was more than $6 lower, trading in the low $89’s, and I was out of the last of my shares (after scaling out). It didn’t last long, but the overreaction on the upside was followed by a nice reaction on the downside, and that was the move that paid me.
Here’s a closer look:
I outline my entire method for trading these extreme reversals in my Advanced Trading Course, so the specific details are reserved for students, but I will give you a few general pointers here.
Profiting from extremes begins with a mindset shift. When you see a giant move, don’t kick yourself for missing it. Instead, start looking for a way to profit once it’s over. Be creative – the market requires it!
Take note of intraday extremes. Don’t chase them, just watch them. See if the pace of the move begins to slow down, and at the first sign of a turn, you’ll know you’re looking at an opportunity. They will not all pan out, but the risk/reward associated with them makes them well worth studying, and often times quite lucrative to trade.
Trade Like a Bandit!
Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com
Are you following me on Twitter yet?
Several Solars Set to Shine
July 19, 2010 at 7:17 am
Last week I discussed timing themes and the benefit of seeing repetition in the markets, but that’s just one way the astute trader can locate profits. Another is to notice sectors and groups which are seeing rotation.
Currently, solar stocks are making quiet but steady headway, exhibiting some very nice relative strength. While the market is bouncing from its most recent correction low, several solars are already in uptrends, boasting higher lows and higher highs.
Even better, there are a few of them which are looking poised for higher prices, provided of course that the patterns they’ve built are indeed confirmed.
I wanted to bring a few to you today and put them on your radar. Here’s a quick rundown of some setups I’m seeing…
SOL is pulling back in a shallow fashion here after a nice run, creating a bull pennant pattern. An upside resolution to this pattern could send this stock heading toward the spring highs:
STP just confirmed a higher low with the creation of a higher high, and has been resting for a week. A return of strength would give this one plenty of room to run higher, but the consolidation area needs to be cleared first – until then, it’s simply resting:
SOLF has been acting well, rising on strong volume in the past couple of weeks and basing here on quiet volume. An upside resolution to this bullish consolidation would technically be very positive:
JASO jumped big from the July 1st low, confirming a short-term higher low and higher high. It’s been consolidating, and looks ready to challenge resistance:
TSL is already on the move out of its consolidation after creating a higher low in recent weeks, but still has room to run:
Even TAN, the solar ETF is looking good, so long as this bullish pattern gets confirmed with a move higher out of the consolidation. A higher low and a higher high have both been established:
Trade Like a Bandit!
Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com
Are you following me on Twitter yet?
Technical Grade: F
June 22, 2010 at 7:09 am
Every chart should be given a grade, if for no other reason than it’ll require you to evaluate the entire situation and make a decision. Should it be traded? Should it be watched? Should it be avoided?
Looking at the chart of F below, this one earns an ‘F’ on recent behavior as well.
Have a MENT
June 21, 2010 at 6:49 am
Quick trades can be among the best kind, keeping capital tied up for a limited time and offering fast gains when they do their thing.
MENT is one I’m eyeing for such a trade. The stock has been quite active of late, moving all over the map within a $2 range for the past several months. Key resistance is now just overhead, and is being tested on the current bounce. Even better, volume has been spiking with advances of late, pointing to solid participation on the buy side.
We may see a breakout occur in MENT any day now, so I’ve got it on my radar for a trade if it can push through the $9.75 resistance area. This one hasn’t shown a lot of recent continuation, so it isn’t one I’m planning to keep a long time… Just long enough to get paid and move on to the next idea.
Here’s a closer look for you:
Trade Like a Bandit!
Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com
Are you following me on Twitter yet?
ANF Looking Vulnerable
January 19, 2010 at 7:25 am
Anytime I see a stock crack support and fail to reclaim it, I pay attention. Especially when it makes no effort to rebound and merely consolidates after that key breakdown.
ANF is doing this right now. Just over a week ago, it undercut an ascending channel pattern on heavy volume, offering a decisive change of direction. Last week, not only did it fail to bounce, but it consolidated in a bear pennant pattern, indicating there may be more selling yet to come.
I’m keeping a close eye on this one, as a move down at $32 out of the short-term pennant would confirm this pattern, possibly leaving the $30 area as the next stop (given that it’s a former key level in the stock).
Here’s a closer look at the chart:
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Is NFLX Leading Again?
January 12, 2010 at 7:46 am
With new highs being hit almost daily in the market, there has been an abundance of long-sided trade candidates. However, weak stocks are still in our midst, and it can serve us well to watch for those outliers – whether as individual profit vehicles or simply as hedges.
NFLX is one such stock. Not only did this one prove to be a market leader when it began trending higher a few months prior to the market turning the corner (NFLX in late 2008 vs. the market in March 2009), but it’s now trending lower while the market continues to climb.
A pair of lower highs has been established since November, and currently the stock is struggling to reclaim recently-broken support. The bounce of the past few days is now starting to create a rising wedge pattern which, if confirmed with a move back under the $52.50 area, could bring another breakdown for the stock. If it does, this one is on my radar for a play.
Here’s a closer look for you:
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
I See You PCU
January 11, 2010 at 7:26 am
Strength in this market has been relentless, and that means many individual names are riding the wave. It can be difficult to work through robust watch lists in search of great plays, but often times it boils down to identifying the most valid levels, knowing if they’re violated that opportunity will emerge.
Last week, PCU “got on its horse” for several days and made a nice move right to upper resistance – a well-defined level it has flirted with several times in recent months. It’s now threatening a breakout, but will need to punch through the $36.50 level in order to pull it off. If it does, this one is on my radar for a play.
Here’s a closer look for you:
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
