Intraday Trading Charts
September 7, 2011
Intraday Chart 1: Strategy #4: Gap Up - Attempt To Fill - BreakOut
A simple, but effective price action intraday trading strategy. Not a cutesy, fancy name, but I think I named it appropriately. If you'd like to review this method, it's located here => share trading strategies
You scan for gap ups, (I've always preferred higher volume, liquid S&P 500 stocks for manual scans) and find stocks that are attempting to fill their gap. Once the stock has either filled the gap or at least attempted to fill the gap and has recovered to near its high of the day, you place a Buy-Stop order above the high.
Why? Because, this stock will have demonstrated strength by coming all the way back to it former high after having closed the gap. If a stock doesn't have a huge gap up and price doesn't even make a serious attempt to test the support at that gap, this is another sign of strength.
As wilt all breakout methods, stop running is always your nemesis. I feel that initial stop placement is best done through manual adjustment according to price action. Others may feel that a percentage stop or other method is best for them.
Percentage stops do not take into account recent price action and frankly, I think they're too simplistic. However, the biggest drawback of using price structure for stops, is they are popular areas for stop running. After enough screen time, you'll get a better feel for where stops are likely to be hit, but in the end there is a lot chance involved here. We never really know how far price will be pushed down after a breakout.
What stock order type is best for a breakout? Buy-Stop or Buy-Stop Limit? It really depends on the liquidity of the stocks you're trading. If the stocks don't have a tight bid and ask spread or they're creating slippage on your breakout trades, then you might try Buy-Stop Limit orders. You will miss some really great breakout trades, but at least you'll be guaranteed not to pay more than your max. limit price.
If you're thinking of day trading thinner, less liquid stocks using breakouts and are worried that you may not get your entire order filled using But-Stop Limit orders, you should know that many breakout stocks will exhibit the exact kind of price action behavior that VF Corp (VFC) did below after its breakout. Price breakouts from resistance will quite often pullback and form/test support at that same area, giving ample price levels to fill your order if it hasn't already.
Intraday Chart 2: Strategy #1: Gap Up - Inside Bar - BreakOut
This strategy is located on the page called "day trading signals" if you'd like to review it. Pretty straight forward inside bar breakout.
The beauty of getting onboard intraday trades, like the example below, is just about any exit strategy works. Whether it be a trailing stop using support, trendline, moving average, volatility stop or just about any other method, it's all good...you're going to make a nice profit...unless you wuss out, get scared and bail during the kind of pause that NE made around 10:30am.
Intraday Chart 3: Strategy #2: Gap Up or Gainer - Lateral - BreakOut
Ah, my old friend the lateral....I wonder how many times I've seen this pattern over the years. Sometimes I even see it in my sleep. What's there to say about it that I haven't already said.
Here's an example below from the same day as the above charts. That first bar kept price packaged up quite neatly for three and a half hours. Notice how volatility became very, very low right before the breakout.
Who says good trades don't happen during lunch hours? Better eat your lunch at your desk. Just kidding.