Trading Review for 1/24/2000
As we noted last night - today was going to be a volatile day.
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 Monday's trading action relative to the top Trade Prospector signals:
Breakout Patterns
INCY gapped above the buy entry @ 157.6 to 160, then sold off through the failure boundary @ 148.2 to 137 1/2, rallied briefly to 149 7/8 and finally closed at 138 1/16
AFM opened at 85 5/8, lower than the 86.1 buy entry, and then fell through the 81.4 failure boundary to a low of 78 3/4 to close at 79 9/16
DOX gapped open above the 52.5 buy entry @ 52.5 to 58, sold off to 54 and finally closed at 55 1/8
AMR opened at 58 3/8, above the 57.8 sell boundary, and fell to a low of 57 3/16 to close at 57 13/16
U gapped open to 23 15/16, still within the 23.2 and 24.6 boundaries, rallied to 24 3/16 and finally closed at 23 9/16
TTWO gapped open to 12 1/2, still within the 11.3 and 13.3 boundaries, and fell to 10 15/16, finally closing at 11 1/4
Even though INCY gapped above the buy entry target, it still provided a good trade entry when it fell through the failure boundary at 148.2 producing a good 10+ points profit.
Similarly, AFM fell through the breakout failure boundary at 81.4 to produce a 2+ point profit.
DOX, AMR, and U provided no entries.
TTWO fell through its sell entry at 11.3, but congested and ultimately closed with a zero to minor profit trade.
Breakthrough Momentum
RLX gapped open to 936.1, within the 930.6 and 942.6 boundaries, sold off to 928, rallied back to 936, and ultimately closed at 896.1
DCLK gapped above the breakdown failure boundary of 115.3 to 115 11/16, rallied to 116 3/4, sold off through the sell continuation boundary of 111.6 to a low of 100 1/2, and closed at 103 7/8
ANCR gapped open to 56 1/2, just below the 56.9 buy entry, rallied to 58 1/2, and then sold off through the 53.5 failure boundary to close at 51 7/16
PUMA gapped open to 105 15/32, above the 102.5 buy entry, rallied to 108 1/2, sold off to 101, rallied to 106, and finally closed at 96 1/16
The RLX index offered option traders an initial entry into puts as it sold off through the 930.6 sell entry price, but traders would have been stopped out on the subsequent rally back to 936. Reentering puts on the next penetration of the 930.6 sell boundary would have given put holders a 34 index points profit (10-20 option points depending on the strike selected).
DCLK offered short sellers entry at the 111.6 level for a nice 8-10 points profit.
ANCR offered traders a rare opportunity - trading it both ways. First long as it rallied through the 56.9 buy entry for a 1-1.5 point profit and then short as it fell through the 53.5 boundary for a 2 point profit.
PUMA gave a long entry after it fell back to 101 and then rallied through the buy entry at 102.5 up to 106 for a 3+ point profit.
Envelope Patterns
LVLT opened at 109 5/8, below the buy entry of 111, rallied to a high of 120 to close at 112 7/8
HIFN gapped open to 69 3/8, above the 67.6 buy entry, rallied to 71 3/4, sold off to 62 5/8, ralled back to 74 to close at 69 3/4
NXLK opened at 100 3/8, below the 101.4 buy entry, fell to 94, rallied to 99, sold off again to 94 and closed at 95 15/16
CMTO opened at 32, below the 33 buy entry, rallied to 35 7/8, sold off to 32 1/2, rallied again to 36 and closed at 35 11/16
UK opened at 56 9/16, above the 56 sell entry, rallied to 57 1/4 (still below the 58 buy entry), sold off to 55 3/4, rallied to close at 58 15/16
LVLT offered traders good long entry at the 111 level for an 8-10 point profit.
HIFN initially offered no entry, but after selling off below the 67.6 buy entry and then rallying back, traders could go long for a 4-5 point profit
NXLK did not penetrate either boundary and offered no entry.
CMTO offered traders two different entries - first as it rallied through 33 for a 2+ point profit and then after selling back off below 33 and rallying again for about a 3 point profit.
UK headfaked and triggered sells at 56 which would have been stopped out for a small loss.
Momentum Intersections
HIFN gapped open to 69 3/8, just above the 69.1 buy entry, rallied to 71 3/4, sold off to 62 5/8, ralled back to 74 to close at 69 3/4
DTE gapped open to 39, above the 37.9 buy entry, rallied to 41 5/16 and finally closed at 37 9/16
CGP gapped open to 37 1/2, below the 37.8 buy entry, and remained stuck in a trading range until finally penetrating the 37 sell boundary for a low of 36 5/8 and a close at 36 15/16
HIFN was also signaled as an Envelope Pattern with a lower buy entry, however if you traded the Momentum Intersection signal you may have taken the long at the open because it was within 1/2 point of the buy entry and managed a 2+ point profit. A second opportunity came after the stock sold off and then rallied back through the 69.1 level for a 4+ point profit.
DTE offered no entry and CGP resulted in only a fractionally profitable trade.
Mutliday Patterns
BRCM gapped open to 315, below the buy entry of 320.4 and above the sell entry of 309.2, and then sold off to 292 1/2, rallied to 305, and finally closed at 287 5/8
CTXS gapped open to 154 1/2, above the 152.9 buy entry, sold off through the 146.2 sell entry to 142 1/4, rallied to 147, sold off to a low of 138 3/8 and closed at 139 5/8
YHOO opened at 353 15/16, within the 359.3 and 347.3 boundaries, rallied to 360 1/2, and then sold off to close at 325 1/4
SAWS gapped open to 84 3/16, above the 83.4 and 79.3 boundaries, and then sold off to 74 1/4, rallied to 78, and sold off again to 72 to close at 72 29/32
NXTL opened at 120 3/8, within the 121.8 and118.8 boundaries, sold off to 116 1/2, rallied to just at the lower boundary near 119, to finally sell off and close at 111 15/16
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 inside the buy/sell boundary, as it sold off through the 309.2 sell boundary it offered good short entry and an eventual 11+ point profit.
CTXS initially offered short entry at 146.2 for about 3 points and then again at 146.2 for another 6-7 points.
YHOO headfaked causing traders to initially enter long at 359.3 and then stop out for breakeven or minor losses and enter short at 347.3 for a 22 point gain.
SAWS offered short entry at 79.3 for 4+ points. Aggressive traders reenetered after being initially stopped out with gains and realized another 4-5 points.
NXTL also offered short entry at 118.8 for 6+ points profit.
Volatility Compressions
CHKP gapped open to 251 1/4, above the 250.8 buy entry, rallied to 273, fell to 255, rallied again to 270, fell to 248, and closed at 255 19/32
OEX gapped open to 782.2, inside the 786.9 and 777.2 boundaries, rallied to 787.9, sold off to 777, rallied to 780, and finally sold off to close at 758.7
SFE gapped open to 167 5/8, above the 166.8 and 163.8 boundaries, rallied to 170, sold off to 162, rallied again to 166, sold off to 148 5/16, and closed at 151 7/8
CREE gapped open to 105 1/8, above the 104.1 and 100.3 boundaries, sold off to 101 1/4, rallied to 105, and finally sold off to close at 91 3/8
Volatility compression trades are usually volatile, but offer the attentive trader significant profit potential.
CHKP offered entry to attentive traders at the open since the gap open was less than 1/2 point higher than the target buy entry and produced 20+ points initial profit. If you missed the open, you got another chance at it when it sold off below the 250.8 boundary and rallied back through it for a 4+ point profit.
OEX offered a chance to pick off a failure at resistance reversal trade. Initially triggering long calls at 786.9, the index failed at 787.9 and reversed stopping traders out of calls and triggering them into puts for a total 28 index point profit. For traders that who missed recognizing the failure at resistance trade and waited to enter puts at the 777.2 boundary after being stopped out of calls, they saw about 18 index points profit. Watch for failures at resistance and support.
SFE offered traders a short entry at 163.8 for an initial 1+ points and a reentry (either at the failure at resistance at 166 or at the second breach of the 163.8 boundary) for between 12-17 points.
CREE headfaked first gapping above the buy entry, then selling off between the boundaries, and then ralliying back through 104.1 triggering traders long only to fail again at 105 stopping out longs for breakeven or small losses. Traders were ultimately triggered short at the 100.3 boundary for about 9 point gains.
Trading Channel
VIGN, BVSN, INKT offered no entries.
DCLK gapped above into the channel (124 and 113.8) to 115 11/16, rallied to 116 3/4, sold off through the lower channel boundary to a low of 100 1/2, and closed at 103 7/8
CMGI gapped open to 120 back into its trading channel (135.2 and 120.3), moved higher to 121, and then sold off to a low of 107 1/16 to close at 110 1/4
SPYG gapped below its trading channel (49.1 and 43.7) to 43, rallied to 45, sold off to 40 7/8 and closed at 41 15/16
AMD gapped to 37 1/4 (inside its channel of 38.7 and 36.4), rallied to 38 7/16, and then sold off to close at 34 1/2
YNR opened inside its trading channel (61 and 57.2) at 57 5/8, sold off to 52 3/4, rallied to just below the lower channel boundary at 56 11/16 and closed at 56 5/8
ASYT opened inside its trading channel (93.7 and 87.6) at 88 3/4, sold off to 86 1/4, rallied to 92, sold off to 83 and closed at 83 3/4
SPCT opened inside its trading channel (25.8 and 23) at 24, rallied to 25 3/4, sold off to 23 1/8, rallied to 24 5/16, and sold off to close at 22 5/8
Trading channel trades can be simple and rewarding. DCLK offered good short entry at 113.8 for a nice 12+ point gain.
CMGI initially looked like it was trying to rally out of its multiday depression and gapped open back inside its trading range only to quickly selloff back through the lower boundary offering a nice short at 120.3 for about 12 points profit.
SPYG offered short entry at 43.7 for a 2+ point profit.
AMD offered attentive traders a failure are resistance trade at the 38 7/16 rally failure for almost 4 points profit. Traders who waited for the breach of the 36.4 lower boundary saw an almost 2 point profit.
YNR offered short entry at 57.2 for about 4 points profit.
ASYT offered short entry at 87.6 but then reversed stopping traders out for breakeven or a small loss. It later offered short entry again - either at about 92 upon recognizing a failed rally or at the 87.6 boundary resulting in between 4 and 8 points profit.
SPCT also offered a classic inside the channel oscillation daytrade - first a failure at resistance entry near 25 3/4 for about 2 points and then a failure at support for about 1 point, and then finally a short entry upon breach of the lower boundary for another point.
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).