The Day Trading Stocks Blog gives you current chart examples of all my trading strategies detailed here at Day-Trading-Stocks.org. It also updates you on any additions to the website.This site is dedicated to educating aspiring day traders.
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Guys, sorry that I haven't been posting much lately, but I've been very busy over the past year working on new business adventures and traveling.
The price patterns I've discussed throughout my site and ebook still occur every day, week after week, month after month, whether I'm posting about them or not. That, you can be sure of. They are a direct result of human behavior and psychology and will never change as long as humans are making trading decisions or making computer algorithms to make the trades. It's your job as a trader to know the patterns and profit from them month after month.
While the S&P 500 was acting weak down around it's low of the day, Marathon Petroleum (MPC) was acting very strong and giving a Strategy #5 breakout on it's 1:00pm bar.
Some other #5 breakouts stocks today with plenty of volume to work with were ALXN, BBY, PSX, AMZN, HRB and UNM.
Ok, so SYMC gave a textbook Strategy #1 setup this morning. A gap up, a perfect lateral and a breakout on the 7th ten minute bar. But, unless you had a very deep stop you got stopped out, right?
It happens when playing breakouts...get used to it. You're going to get stopped out a lot, that's why you have to really be a pig with your winners.
So what do you do with your loser symbols like SYMC this morning? Do you delete them and move on to another stock on your watchlist and look for the next setup? Perhaps, but often when you have a gapper like SMYC, it takes two entries to catch the big move. It's sometimes psychologically difficult to take a 2nd swing at a stock after taking a loss, but many times you'll find the big moves don't come until a stock has had enough time pass before making it's next push up. In this case, SMYC makes the next breakout on the 12:10 bar for a Strategy #4 breakout.
If you keep your stops tight, and keep your losers small, it makes it a lot easier to take that second swing. Hold your winning trades far enough and you'll be able to afford two or three losers before catching the train.
By the way, if you take a look at SYMC's daily chart you might notice the clue that it gave, that this stock could be a big mover after the gap up.
Teradyne's (TER) first ten minute bar, right off the bat put this mover into multi-week high territory.
As happens so often, when an equity puts in a stellar performance on its first bar, you'll see a pause, or a consolidation period. In this case, a triangle formed during consolidation.
What I'd like you to notice here, is the price level that would be an appropriate choice for a buy-stop order. If you don't know what I mean by buy-stop order, you can check out this page about stock order types. Learn about basic stock orders
Many traders might be tempted to place their order right above the triangle. Look at the overhead resistance noted by the blue arrows in the chart below. Although a buy order in that position worked out fine this time, a smarter approach is to place an order above the resistance, further out of the triangle. That way you know buying strength is strong enough for a serious breakout.
Biogen Idec formed a classic cup and handle before its Strategy #5, afternoon breakout. Today's move was an extension of the past three days positive movement, which has broken a downward trend on the daily chart.
Who say's you can't make money off a 'gap down' list on long trades?
That's exactly what strategy #7 does...take advantage of gap downs and short squeeze movement in the opposite direction.
THC gapped down, formed an inside bar on the second 10 minute bar forming a set up and then broke to the upside. After closing the gap, price makes a deep pullback, which by the way, is very common. So, if you're in a trade such as this, don't sweat that pullback next time, just keep that stop in place and hold tight.
Price then breaks its high from the closing of the gap and continues upward. Now, if price had come back again to the pullback low exhibiting weakness, then it's a judgement call as to whether or not to exit the trade early or place a stop below the pullback low.
If you are paying attention to your list of stocks in play on your monitor...and I do mean paying close attention, because the following situation can allude you if you're not actively scanning stocks. There are ways to make money when a stock comes back into it's previous days trading range.
I go over a couple of fantastic methods in my ebook, but today lets take a look at a different technique that I've used many times in the past with great results.
Marathon Oil (MRO) below, had been on a multi-day downward trend, but today, after opening below it's previous day's low, price not only managed to move back into it's previous day's range, it formed higher lows. This is a very important price pattern confirming an upward trend in MRO.
So, by 1:30pm it moved back into the range and formed higher lows. This is a very bullish price pattern set-up by itself. But, notice what happens on the 2:10, 2:20 and 2:30 bars. The 2:10 bar matches the high, and the 2:20 & 2:30 bars form a Lateral. A large triangle also formed.
This was your tip to really pay attention and/or setup a Buy Stop order for an afternoon breakout.
MRO was clearly oversold and ready for an uptrend. Watch for these clear signals...they can be real money makers.
Today's price action was mostly about lunchtime breakouts. Many stocks broke out to the upside between 11:30am - 1:00pm. A perfect day to work Strategy #5 breakouts.
Citigroup was no different breaking out on the 12:00 bar.
Anyone that scans for Strategy #5 - afternoon breakouts, has to love the way EFX broke out today. The same candle not only breaks above it's run of the mill consolidation area, it breaks above the high from yesterday too. I hope some of you caught this one. Often what you'll see in this case is a second consolidation level before a second breakout or just a rejection of overhead resistance and a breakdown back to lower price levels.
Watch for the inside bar setups that give you a very narrow range bar. They tend to give a better trade. When the breakout launches this explosively, you're going to have to make that always tough decision..."do I get out now with a nice profit or should I hold for even more?" Consider using the ever useful trendline to make the decision for you. On a really good day you can catch the first move for a nice profit and occasionally price will form a base to setup a second profitable afternoon breakout trade. Double trades like that are real confidence boosters, but don't expect them to happen very often.
Family Dollar Stores (FDO) has been on a huge run this month, posting gains of 15.5%. Today up as much as 4.6%. Apparently call buyers were hitting this stock pretty hard today, to the tune of 10x it's normal contract volume.
But as a day trader should you care why a stock price is moving up, often when the market is pulling back? Sometimes it's interesting to know why, but it's certainly not required to make money day trading stocks. What you need to pay attention to are the price action patterns that are forming in the morning and early afternoon. Price action tells you everything you need to know to trade stocks with low risk, high potential reward set-ups.
Today FDO set up a Strategy #2 lateral with a clean low risk breakout. Check it out.
TripAdvisor (TRIP) gave a nice Strategy #4 setup by gapping up, attempting to fill (and actually filling) the gap and then eventually breaking above the original resistance line.
Those of you that have the ebook...I hope you enjoyed all the great plays that the market gave today ;)
Teradyne (TER) gapped up, came back to support around the 15.24 level, formed an inside bar on the 2nd ten minute bar setting up a Strategy #1 day trade.
General Dynamics (GD) moved up with the rest of market, but as the S&P pulled back and closed it's gap, GD exhibited strength by forming a small inside bar on the third 10 min. candle giving a Strategy #1 set up. After a clean break, GD didn't retrace much until it formed a lateral giving another chance at a breakout trade.
Cameron International (CAM) broke out of it's Friday triangle yesterday, then continued it's move up this morning. As often happens following a strong move, a tight lateral occurred serving up a strategy #5 set-up. The breakout pulled back a normal amount before price continued to rise the remainder of the day.
It's often a good practice to check overhead resistance on a higher time frame chart when letting a trade ride with profits during the day. It can sometimes give you information on when it might be best to go ahead and take your profits or at the very least tighten your stop. Lets take a look at CAM's overhead resistance on it's weekly chart below and I'll explain what I mean. The high (58.50) of the long red bar from last August represents major resistance to this recent move up for CAM. If for example, a long day trade is made this week and CAM makes a run toward 58.50, you might consider exiting before it reaches that resistance, because chances are it will sell off before breaking through, if it ever does. Now, if it reaches this level and it still the morning session, I would probably hold, tighten stops, and wait for a breakout off that price level. If it was in the afternoon and I had already built up some nice profit...I'd consider strongly cashing in. Well, we'll see what happens this week with CAM. Maybe it'll bump up against that resistance soon.
I've experienced this kind of trade many, many times. I'm sure a lot of you have too. Perfect set-up, great fill, the stock(s) you're in look really strong, much stronger than the overall market -- you're in a nice profit and it seems as though you might walk away with a 5 X Stop or more trade(s).
And then the market gets weak and sells off it's gains. You have to watch closely for that kind of price action on days when the S&P gaps up, because it does not like gaps. Short sellers often come in betting on the gap to fill. And often it does. I much prefer to be in gap stocks when the S&P opens closer to the previous days high. So, as with AET below, give yourself room to let a stock run for big points, or decent multiples of your stop, but your exit strategy should lock in a portion of the profit or at the very minimum come to breakeven level after price has moved significantly in your direction. In any case, you don't want to be stopped out because you're not giving the trade enough room to breathe. I go over some ways to do this in my ebook. It is a trade-off, no doubt...some of you will definitely prefer ratcheting up your exits quicker to lock in profits. That will of course result in a higher win%, but will cause you to give up those really big winners and likely cause overall profit to be lower in the long run. To each his own.
Textron looked like it was going to create a Strategy #4 set-up after the 10:00 bar, but later broke down creating a new low after 11:00. Normally one would probably take this stock off the radar, after a breakdown, but clearly this stock should catch your attention on your gainers list during the 11:30 bar. At this point, it's back to a potential #4 set-up, after two attempts to close the gap.
OK, so lets say you found TXT early enough and got your fill on the breakout above resistance, illustrated by the 10 minute chart below.
Where would you place your initial Stop? Are you going to use a percentage based Stop? Many do...personally I don't like them. I prefer to utilize price action structure and support & resistance. Often a low of a ten minute bar is an adequate area for a stop. However, you'll notice in the chart above, it's quite far from the breakout zone, which puts you into a bit more risk than I'm comfortable with. So what can be done? Consider opening a lower time and looking at areas of broken resistance or potential support. The red arrows in the five minute chart below are two reasonable places to place Stops. One below the 5 min. breakout candle or one below the broken resistance. No this is not a perfect method, but you've got to place your Stop somewhere, so why not use some market logic, rather than pulling a percentage out of the air, using it on every trade and hoping it holds?
SPY itself gave a textbook play off Strategy #3, as well as Strategy #4. SPY gapped up, came back to support and closed the gap, and then back to the day's high giving a Strategy #4 set-up. If you had traded that first set-up you may or may not of gotten stopped out, depending on stop location. On the 2nd attempt at a new high, SPY created a triangle pattern setting up a Strategy #3 play. The breakout then occurred on the 11:20 bar. Is SPY a liquid ETF to trade? No doubt about that - SPY traded 92 million shares today.
Have a safe and nice holiday everyone!
Normally Strategy #8 is traded per the rules. But, occasionally price gaps up above both bars in this set-up and doesn't give you a nice breakout. So what can you do? Well, normally you would move on to the next set-up and go about your business. However, sometimes price action creates another opportunity that you should be on the lookout for.
Notice how Northeast Utilities (NU) below, gaps above it's IB set-up, but then comes back to support formed by yesterday's high. An alternate way to trade this IB strategy is to wait and see if the stock has the strength to break that first bar's high using a buy stop above the first candle's high.
NU performed very well compared to the rest of the market. SPY (S&P 500) below, was really having trouble and moving sideways as NU made new highs.So if you were long NU, and holding a nice profit, and not using a trendline for an exit like I've illustrated above, how could've SPY given you a heads up that maybe it was time to get the heck out with your profit?
Lets take a look at the chart of SPY below. Once both the 2:30 and the 2:40 bar broke the low of the day...well, that's a major heads up from the market telling you to at the very least -- tighten up your stop.
Today was all about the short squeeze play for day traders. Gannett Co. below, was a classic example of how being on the right side of these can rack up profits very quickly. The fun part of these kind of trades is deciding when to get out after price goes parabolic.
Many of you that are new to trading may not feel comfortable yet trading stocks short, but know that there is good money to be made selling short, especially if you time it with the right market environment. If you are not looking into these opportunities, you might consider them later on after gaining more experience.
Whatever method or time frame you use to determine the overall trend of the market, keep in mind that the price action strategies that are discussed here can be traded short as well. Following is an example of Strategy #5 (afternoon breakout).
Moody's gapped up right above it's previous day's high, pulled back to find and test support in that area, and by 1:30pm had formed a higher high.
Once that tall bar formed around 1:45 that's your signal to start paying attention for a Strategy #5 breakout or if you prefer...to go ahead and place your buy stop order and move on to scouting for the next set-up.
The purpose of this page on intraday trading is to give you an abundance of chart examples and tips from all the price action and price indicator strategies that I've detailed on this site.
VMC made three consecutive inside bars on the 10 minute chart before breaking out. It was a very clean break and never came back on later bars to test support.
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While the S&P was selling off until around 10:30 today, MU (Micron Technology) was moving in a wide lateral setting up a Strategy #2 play. MU broke out before the S&P even approached the high of it's first bar of the day.
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Many gainer stocks fell into the pattern of Strategies #1, #2 and #4 today.
NDAQ below was a #1 pattern. A gap up with an inside bar breakout. Details of the method are here => day trading signals.
I'm sure by now, some of you that read theses posts on my blog and other pages of my website are picking up on the fact that each day many of the big gainer stocks tend to favor one, two or more of the set-up patterns from my strategies page. If it's not one of these patterns on a particular day, then it's generally one of the patterns that's covered in my eBook. It's the same way most days. The large gainers fall into a few patterns. Of course, on a day when the S&P 500 is extremely bearish or meanders slowly downward the entire day with no serious pullbacks, that's going to put a real dampening effect on many stocks, except the ones that buck the trend of the market and maintain their high relative strength. But, that's why I keep preaching about tight stops and going for low risk - high reward trades. Not all days will have great long-side trades like the market has been giving lately. So, as always, look for the tight stop trades and let those big winners run when you can.
Here's today's example chart.
After breaking out of a lateral Nike made a nice run up a today.
Keep your stops reasonable and let the winners run. If you're using price targets, a trade like this has no problem giving 3 times stop.
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Lockheed formed a lateral and a strategy #2 set-up right from the first bar today.
But, if you were sleeping at your screen it gave you a second chance with a Strategy #5 breakout at 12:00.
Strategy #7 is a nice set-up to play when the S&P gaps down and stages an early morning rally.
Nearly every time the S&P 500 gaps down and closes the gap, you will see on your gainers' list stocks that are undergoing a 'short squeeze'.
This is one stock price pattern that enables you to take advantage of this specific S&P pattern when it occurs. And it occurs fairly often
Today was a strong day for Strategy #2. Quite a few stocks fell into this pattern in Friday's session. That first huge control bar kept price inside almost until noon. Many times when the first 10 minute bar of the session has that wide of a range, price will remain in a lateral for hours and sometimes even the entire day.
When you see this kind of pattern, and price has dipped down towards the lower half of the control bar, give it some time and come back to that stock later, especially if the market starts to rally. Once you see price getting closer to the breakout point, consider placing a buy-stop order. You might have to deal with a false breakout on the first try, but if you keep tight stops you'll be OK to go for a second shot at a breakout. Just make sure you let the winners run as demonstrated in this example. If you've read my page on expectancy, you know that a 40% win rate is just fine as long as you squeeze the winners 'till they squeal .
Strategy #8 details here ==> Inside Bar Trading Strategy
On days like today, when the S&P exhibits early weakness and then moments of rebounding strength, you will always see stocks undergoing explosive short squeeze patterns. Am I going to discuss the patterns and strategies to go along with those patterns? Nope, sorry, those are in the eBook.
But, as I've mentioned before, on day's when the market gives a quick drop or gap down and makes an attempt to recover, there are almost always stocks to trade with strategy #4 (from the day trading strategies page). Find stocks that exhibit strong relative strength and look for pending breakouts.
Compare the pattern of Lockheed below with the S&P. It was pretty clear far in advance that this stock wanted to breakout. Keep a gainers list updating and watch for strength on days like this to catch those breakouts.
Today was an an example of an S&P pattern, that I mentioned the first two eBook strategies work well with. The market sold off a bit in the morning and rebounded by noon.
But, because of the mild nature of the market's morning dip, there was also plenty of Strategy #2 entries to profit from.
Here's one of them.
Many of you have asked me if I would ever make an eBook. I have, and it's now available.
If you've been trading my free day trading strategies with success, I think you're really going to like it.
Click here for details ==> Day Trading eBook
My day trading ebook features day trading strategies using price action patterns. This ebook is a continuation of my free strategies page.
Looks like the S&P wants to break out of a Cup and Handle pattern on the weekly chart to continue it's bull run since March 2009. Next major resistance on the weekly isn't until 1440.
Speaking of a C&H pattern, today's afternoon breakout example was a somewhat shallow, but successful C&H. I hope you caught that one.
Morning sell off in the S&P followed by a decent rally in the afternoon. This is a very common S&P 500 pattern. Generally gap up strategies will either not fair very well or may not have many set-ups on days like this.
However, Out of the day trading strategies I've described, two are appropriate for this situation, but one is somewhat rare. I have two other strategies that are far better suited to this kind of market that I'll be disclosing soon in an ebook in addition to other material.
But as far as existing strategies, Strategy #5 does a fair job on days like today.
Sometimes stocks are generous enough to hand you more than one setup during the day. Today, DOV gave you a both a Strategy #1 in the morning, and then a Strategy #5 setup in the afternoon.
Any time you see the S&P form a morning cup shape and then stage an afternoon rally, even if the move isn't very strong, you're going to see plenty of stocks making Strategy #5 breakouts.
Strategy #4 is an afternoon breakout trade that can form a number of different patterns, but they all do basically the same thing...breakout of an area or line of resistance formed in the morning session.
The pattern that forms after the initial morning impulse may be a rectangle or a triangle or maybe even a cup and handle. Notice the handle in this pattern below how it formed a small triangle. I love to see this kind of very low price volatility as it inches up towards resistance. Remember volatility cycles and it can only be bottled up for so long and then BAM it makes a move.
These are the kind of low risk afternoon trades you need to hunt for. This part of the day can be extremely boring. Almost like watching paint dry. But these patterns I'm showing you NEVER die. Because of the nature of markets they will always produce, but you have to be at your screen to find them and that can be frustrating at times, I know.
Some days many won't breakout or they breakout and fail. If they don't work out, no big deal -- you lose a small amount and you move on to the next trade until you find the trades that let you ride for multiples of your stop. No brain surgery here, just common sense. As always practice on the simulator first until profitable.
Back from vacation. Maui was very beautiful, but it's always good to be back home -- at least in the spring season.
Back to the price patterns. This type of pattern below can be traded as a Strategy #1 or #2. In other words, the double inside bar can be traded from the breakout of the second inside bar or from the breakout of the top of the lateral.
I added a volatility stop as an example of an exit strategy.
The pattern of this stock throughout the day is typical for a stock with strong relative strength in a weak market, but finally succumbs to the weakness as the indexes fall apart after 2:00pm.
Same pattern in the S&P today. So SPY was a candidate for the same trade before it sold off near noon.
I'm going to see if I can get a tan in Maui over the next week, so I may not be posting until I get back. I was thinking about taking my laptop, but I'm also thinking about making it a computer-free week too -- just tropical drinks, sun and some hiking.
Keep in mind next week that the S&P will be bumping up against resistance @1344 on the daily chart and that just happens to be a Fib. extension level (.618) as well on the monthly chart. Not a big deal for a day trader, just something to be aware of since it could be a prime area for a pullback.
Have fun, I know I will.
Strategy #4 details here ==> Trading Strategies