Trading Review for 1/21/2000
Successful trading is about knowing where to look for opportunities, knowing when to seize the opportunity (or not), and managing their risk to maximize their profits. To that end, let's take a quick look at Friday's trading action relative to the top Trade Prospector signals:
Breakout Patterns
ENE gapped above the buy entry @ 67.5 to 70 1/2 and continued to a high of 73 1/16 finishing at 71 5/8 (+4 1/4)
GERN gapped above the buy entry @ 24.6 to 29 1/4 and fell back to 27 7/8 and continued to a high of 33 3/8 closing at 31 9/16 (+7)
LVLT gapped above the buy entry @ 98.1 to 100 1/16 and continued to a high of 111, closing at 110 1/2 (+12 3/8)
AGC opened at 60 7/8, just above the sell entry @ 60.7 and fell to 57 3/16 (-3 5/8)
ASFC opened at 26 5/32, above the sell entry @ 25.5 and below the failure boundary @ 26.6, it then fell to 25 5/8 (just above the sell entry) and reversed direction hitting a high of 27 1/16 and closing +1 7/16
CMA opened at 41 5/16, just above the sell entry @ 41.2, and fell to a low of 40 9/16, closing @ 40 13/16 (-1/2)
Unfortunately, the ENE, GERN, and LVLT trades gapped far outside the range. An aggressive trade might have jumped on the bandwagon in such instances maintaining tight stops at least until a breakeven stop could be instituted. However, more conservative traders will want the price action to trade through the entry price (or temporarily pullback to near it demonstrating that the origiinal entry price is not a support level) before initiating a trade. Therefore they would simply have not traded them
On the otherhand, AGC presented an excellent short worth over 3 points. ASFC presented two possible trades - (1) a long entry when the 25.5 sell entry price demonstrated support or (2) a long entry upon breach of the 26.6 breakout failure boundary. In the first case, the trader would have picked up about 1 1/4 points. In the second case, only about 3/8.
Breakthrough Momentum
HIFN opened at 62, between the breakthrough boundaries of 63.3 and 56.4, and fell to 56 5/8 before rallying to close at 67 1/8 (+5 3/8)
TUTS gapped open to 49 1/2, well above the sell failure boundary of 47.5
LGTO opened at 30 7/16, above the sell entry of 27.8 and traded in a tight range closing at 31 9/16
NMSS opened at 45 15/16, below the buy entry of 45 15/16, and traded up closing at 47
In this case, only HIFN provided a good entry. Again there were two ways to play this trade: (1) recognizing that the stock at bottomed @ 56 5/8, near the failure boundary of 56.4, an aggressive trader would have gone long risking a stop at 56 3/8 and making about 10 points on the trade. The more conservative trader would have waited for the original 63.3 entry boundary to be breached and profited about 3 1/2 points.
Envelope Patterns
PEB opened at 170 9/16, below the 175.5 buy entry, and ran up to 180 (an S/R level was projected at 179.5) before selling off and closing at 167 7/8
LTEK gapped open to 243, well above the 235.3 buy entry, and sold off to 214 3/4 (just above the 214.1 failure boundary) and then proceded to rally to 234, closing at 218
LVLT gapped open to 100 1/2, above the 98.6 buy entry, and ran up to 111, closing at 110 1/2
HIFN opened at 62, just below the Envelope Pattern buy entry of 62.3, fell to 56 5/8 and then rallied to close at 67 1/8
IMCL opened at 60 1/4, just below the buy entry of 60.8, fell to 59, and then rallied to 67 7/8, closing at 66 3/4
Here we see an example of the different trading and risk management algorithms that Trade Prospector applies.in each instance. Trade Prospector signaled HIFN for both breakthrough momentum and an envelope pattern. However, it computed different entry prices in each case based upon the nature of the situation. The trader entering long at the envelope pattern entry price of 62.3 realized almost 5 points profit.
PEB provided a 4 point profit on the long entry from 175.5. Intermediate and aggressive traders would have also recognized the failed rally at Trade Prospector's 179.5 resistance projection and gone short for a further profit of at least 10 points. Conservative traders would have either been happy with their 4 point profit on this trade or possibly risked a short below the original 175.5 entry price for another 6-7 points.
LTEK presented a similar bounce off entry boundary trade. After gapping above the original buy entry, it sold off to just above the failure entry price of 214.1 and again reversed. Intermediate and aggressive trades would have gone long and risked the failure boundary. Trailing stops (and the failing rally @ 234 near the original entry price level) would have signaled an exit with a 15-20 point profit. Conservative traders would have waited for a breach of the boundaries and not traded this.
LVLT offered no entry.
IMCL offered good entry at the 60.8 price level for a 6-7 point profit.
Momentum Intersections
AXP opened at 153 and traded in a relatively tight range inside Trade Prospector's computed boundary prices.
VYTL gapped down to 40 7/8, below the sell entry of 42.2 and continued its selloff to 36 15/16 (at a Trade Prospector projected support level) and then rallied back to 45 5/8
PVN opened at 84 7/8, above the sell entry of 83.1 and below the buy entry of 85.3, and sold off to a low of 79 3/4, closing at 80 9/16
SLR gapped down to open at 81, below the sell entry of 81.8, and continued to sell down to 78, closing at 80
In this case, AXP offered no entry. VYTL offered two entry opportunities: (1) when bouncing off of Trade Prospector's support projection @ 37 for a profit of 8+ points or (2) when rallying through the original 43.9 buy entry price for a 1 5/8 profit. PVN offered excellent entry shorting from the 83.1 entry price for a 2-3 point profit. SLR provided no good entry.
Mutliday Patterns
BRCM gapped open to 321, still below the buy entry of 323.7, and then sold off through the 314.4 sell entry to 310 3/8 before finally closing at 312 7/16
NTAP opened at 115 3/4, just below the buy entry of 115.8, fell through the sell entry of 111.8 to 110 and then rallied to 121 1/2, closing at 117 1/8
ELON gapped down to 47, well below the 50.7 sell entry, rallied back to 50, failed and sold off to 46, again rallied to about 50, and then finally sold off to close at 44 15/16
CLFY opened at 128 5/16, within the 130.7 and 126.7 boundaries, and rallied to 131 1/8 before selling off to 127 13/16 and finally closing at 129 11/16
GBIX opened at 83 1/16, within the 85.3 and 81.3 boundaries, and sold off to 82 before rallying to 90 and finally closing at 89 13/16
Multiday patterns, like volatlity compressions, often result in volatile explosions through (or gap beyond) the computed entry boundaries (which are actually selected Trade Prospector support/resistance price levels). BRCM gapped open, but remained below the buy entry price (resistance) of 323.7. It then found it impossible to reach and breach that resistance level and turned south ultimately penetrating the 314.4 support. This an excellent example of having the key information. Intermediate and aggressive traders would have recognized the failure near resistance and shorted the stock (risking 321) for a profit of 6-8 points. Conservative traders would have waited for the 314.4 support to be broken for a profit of 2-4 points.
NTAP presented aggressive traders with a failue at resistance scenario at the 115.8 resistance and a good short worth 4-5 points. Conservative traders would have taken the 118.8 sell entry and depending on how tight their trailing stops were realized a breakeven to a 1 1/2 point profit. Upon rallying again back through the 111.8 boundary, aggressive traders would have gone long risking 111 3/4 and realized a 5-9 point profit. Conservative traders would have entered long at the 115.8 boundary and realized from 1.25 to 5.5 points profit.
ELON would have only been traded by intermediate or aggressive traders who recognized that the rally back to the 50.7 resistance level failed and shorted the stock for a profit of 4-9 points.
CLFY would have resulted in a small loss for all but the quickest traders as it rallied only 3/8 beyond the buy entry price before failing its rally. Make no mistake, even with Trade Prospector information losses will occur - they are fact of the business. Your goal is to minimize them while maximizing your gains.
GBIX provided a good long entry upon the penetration of the 85.3 boundary for a profit of about 4 points.
Volatility Compressions
BRCM and NTAP also signaled Multiday Trading Patterns and are discussed above.
VIGN gapped open to 201 3/4, above the 199.7 buy entry, and sold off to 196 before rallying again to 219 7/16 and finally closing at 212 1/2
MLNM gapped open to 178 1/2, above the 176.6 buy entry, and sold off to 160 1/2 (just above the 160.2 sell entry/support) before rallying to 202 and finally closing at 200 5/8
PMCS gapped open to 190 1/4, above the 180.1 buy entry, and sold off to 185 1/8 before rallying to 198 1/2 and finally closing at 191 1/4
Volatility compression trades are usually volatile, but offer the attentive trader significant profit potential.
BRCM and NTAP trading are discussed above.
VIGN is another example of why we usually prefer not to risk an entry on a gap open much beyond Trade Prospector's computed entry boundaries. Following the gap open, the price sold off back below the buy entry (remember for these signals the entry prices are Trade Prospector support/resistance projections). It gave good entry upon its subsequent rally back through 199.7 for a profit of about 13-19 points.
MLNM offered two opportunities for entry - (1) upon the bounce off the 160.2 support boundary for a 40+ point profit or (2) upon breach of the original 176.6 resistance boundary for a 24+ point profit.
PMCS provided entry only to the aggressive trader who traded the reversal at 185 1/8, otherwise there would have been no good entry,
Option traders would have, of course, realized less profit points but higher leverage in each of these cases.
Recognizing that a mere one point per day profit when trading 500 shares (or 5 option contracts) is $120,000 per year, you begin to understand the potential for profit in applying Trade Prospector's information.
Copyright 2000, by Third Millennium Trading. All rights reserved. This information is proprietary and reserved for the personal use of Trade Prospector users and registrants. No other use is permitted without the express authorization of Third Millennium Trading.
Disclaimer: Third Millennium Trading does not recommend the purchase or short sale of any stocks. Trading should be based on your own understanding of market conditions, price patterns and risk. The information presented here is designed to contribute to your understanding. Controlling risk through the use of protective stops is critical (more).