Trading Review for 1/26/2000
Today was one of those narrow trading range days that will likely end up coiling the market for a large move in the next few days. Remember, if you don't get a trade with the right entry, it's not a crime to NOT trade.
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 Wednesday's trading action relative to the top Trade Prospector signals:
Breakout Patterns
LSI gapped open to about 87 and then quickly sold off to 83 5/8 before reversing and rallying to 88 7/16 to close at 86 5/16
VSH gapped open to 41 7/8, bounced lower to 41 1/2, rallied to 42 1/4, and then hyperbolically sold off to bottom out at 39 13/16 and then rallied to 41, finally selling off to close at 39 9/16
DL gapped down to 16 and continued to 15 3/16 and then treaded water to close at 15 13/16
FDX opened at 40 5/16, sold down to 40 1/16 and then ralied to 42 5/8 to close at 42 3/8
GT opened at 24 1/4 and then traded in the 24 1/4 to 24 7/8 range to close at 24 3/8
LSI gapped above the 85.5 buy entry but quickly sold off and ultimately reversed near the 83.9 lower boundary before rallying back to a high of 88 7/16. This offered aggressive traders an entry at the bounce off support for about a 4 point gain and conservative traders an entry at the original 85.5 entry price for a 2+ point gain.
VSH opened fractionally above the 41.7 upper boundary triggering traders long but the reversal stopped them out with a small loss or breakeven depending on the trader's stop management. However, this offered aggressive traders an opportunity to reverse short and capture 2 points. Conservative traders were triggered short at the 40.3 lower boundary for fractional profits.
DL gapped more than 1/2 point beyond the 16.7 lower boundary and was a no trade.
FDX offered long entry at the 40.3 boundary for 1-2 points profit.
GT was range bound and was a no trade.
Breakthrough Momentum
YHOO gapped lower to 340 1/2 and continued to selloff to 328 1/4 finally rallying back to under 340 only to selloff and close at 328 9/16
QCOM gapped seriously lower to 129, trading down to 120, before recovering back to around 130 and then selling off to close at 124 5/8
PG gapped open to 99 and then ran up to 100 13/16 and closed at 100 1/2
YHOO offered short entry at the 332 lower boundary at least twice - first for about 3 points profit and then for 4 points profit. If you caught the 11:30 ET and 12:00 ET mini-rallies above 332 and the subsequent selloff through the boundary - you picked up 2-3 additional points.. Trading channel traders who may have been watching YHOO were triggered short at the 336 lower channel boundary twice - once for about 7 points profit and then for another 6-7 points..
QCOM gapped well below its short entry boundary and was a no trade.
PG failed its rally at the 100.8 upper boundary and became a no trade except for aggressive traders who faded the failure at the upper boundary for fractional profits.
Envelope Patterns
WAT opened at 68 1/2, sold down to 65 1/4, and remained narrowly range bound for the rest for the rest of the day to finally gap up and close at 68 1/2
VISX opened at 27 1/16 and sold off to 25 1/2 before rallying back to 27 1/2 to finally close at 26 1/4
CCL opened at 42 3/8, sold lower to 41 7/8, and then rallied to a high of 45 1/4 before selling off to close at 43 15/16
WAT failed to penetrate either boundary and was a no trade.
VISX offered short entry at 26.6 for up to a one point profit and then again at 26.6 for a fractional gain.
CCL bounced off its lower boundary and traded through its 43.8 upper boundary. This offered aggressive traders an opportunity to play the bounce off support for about 3 points and more conservative traders gained about 1 point.
Momentum Intersections
PG gapped open to 99 and then ran up to 100 13/16 and closed at 100 1/2
EFII gapped open to 48 5/8, rallied to 50 1/16, and then sold off to close at 47 13/16
WAT opened at 68 1/2, sold down to 65 1/4, and remained narrowly range bound for the rest for the rest of the day to finally gap up and close at 68 1/2
MER gapped open to 83 and continued to rally to 87 15/16 to close at 87
PG failed to breach the 102.7 upper boundary and was a no trade.
EFII triggered traders long at 49.6 only to stop them out shortly after for from breakeven to a small loss.
WAT failed to breach either boundary and was a no trade.
MER gapped open 0.6 points beyon the upper boundary - aggressive traders who ignored our 1/2 point rule entered long and were rewarded with a 4 1/2 point profit (this time). Even though we miss some opportunities like this, the 1/2 point gap rule has proven to be a good risk manager.
Mutliday Patterns
GLW opened at 153 and then quickly shot up to 159 3/4 only to sell off back to close at 156
PEB gapped open to 164 3/4 and then sold off to 160 1/16 and close at 162 15/16
MEDI opened at 161 and quickly ran to 170 7/8 only to selloff to 159 7/8 and then rally to close at 166 1/16
Multiday patterns, like volatlity compressions, often result in high volatility for the stocks. GLW offered traders long entry at the 155.1 boundary for a nice 4 points profit.
PEB offered aggressive traders a short as its rally failied well before reaching the 166.1 upper boundary and fell through the SR3 price at 163.4. Breakout traders entered short as it fell through 161.2 for about 1 point profit.
MEDI triggered traders long at the 164.4 boundary for 5-6 points profit, short at the 161.2 boundary for a breakeven trade (aggressive traders would have reversed upon the failed selloff for another 4+ points), and long again at the 164.4 boundary for a fast 1 1/2 points.
Volatility Compressions
RIMM gapped open to 75 3/16 and immediately sold off to 72, bounced twice to around 74, and finally sold off the rest of the day to close at 71 1/2
NOK opened at 182, rallied to about 184 1/2, sold off to 181 1/2, rallied to 184 1/2 again, sold off to 183, rallied to 185 7/16, and finally sold off to close at 182 15/16
KOPN gapped open to 67 3/8 and promptly started selling off for the rest of the day to close at 63 1/16
Volatility compression trades are, well, volatile. But they offer the attentive trader significant profit potential.
RIMM traded within the volatility compression boundaries and was a no trade.
NOK attempted rallies which both failed at the 184.4 boundary offering aggressive traders opportunities to trade the failure at resistance - first for 2+ points and then for 1+ points. Upon the breach of the 184.4 boundary on the rally to 185 7/16, traders would have been stopped out at about breakeven. Again, aggressive traders would have reversed short upon the rally failing back through 184.4 and picked up another point profit.
KOPN failed to breach either boundary and finally closed about 1/2 point above its breakdown boundary.
Trading Range Patterns
PEB gapped open to 164 3/4 and then sold off to 160 1/16 and close at 162 15/16
GLW opened at 153 and then quickly shot up to 159 3/4 only to sell off back to close at 156
LBRT gapped down to 88, sold further to 86 5/8, rallied to 91 to close down at 88 11/16.
Trading range patterns often produce good volatility as well. And as we've said before, volatility is a trader's friend because it produces opportunities. PEB offered aggressive traders a short as its rally failied well before reaching the 166.1 upper boundary and fell through the SR3 price at 163.4. Breakout traders entered short as it fell through 161.2 for about 1 point profit.
GLW offered traders long entry at the 155.1 boundary for a nice 4 points profit.
LBRT triggered traders short at 87.2 but were stopped out at breakeven or a small loss. Aggressive traders reversing upon this bounce off support realized about 4 points profit. Likewise, aggressive traders who recognized the failure of the rally short of the 92 upper boundary picked up another 2+ points.
Trading Channel
From the Trading Channel Breaches group - JDSU, VRSN, VRTS
From the Near Trading Channel group - NTAP, AMD, SUNW
From the Narrow Trading Channel group - QLGC, IMNX, QLTI, NXTL
JDSU opened at 233 and immediately sold off for the rest of the day to a low of 215 and closed at 216 15/16
VRSN gapped down to 193, sold off to 187 1/8, and then traded between 192 and 187 1/8 until closing at 189 13/16
VRTS gapped open to 161 3/4, sold off to about 158, rallied to a high of 169 3/8, only to crash in the last hour of trading to close at 157 1/8
NTAP gapped open to 108 1/4, quickly sold back to 106 5/8, rallied to about 111, sold off again to 107 1/4, and then rallied back to a high of 115 1/8 before selling off to close at 108 3/8
AMD gapped down to 37 5/8 and range traded generally down to close at 37 1/18
SUNW opened at 81 1/2 and sold off spending most of the day oscillating around the 79-80 price range before finally closing at 78 5/8.
Trading channel trades can be simple and rewarding.
JDSU remained above its trading range and offered no good entry.
VRSN gapped down into its trading channel but still offered no reasonable entry.
VRTS also remained above its trading channel and offered no good entry.
NTAP offered entry at the 107.2 upper boundary after coming back from its gap open and gave traders up to 7 points profit.
AMD gave no good entry.
SUNW whipsawed traders a couple of times at the 79.7 lower boundary for up to a couple points loss before they would have stood back from the trade.
Whipsaws can happen in choppy markets and traders should always step away from the trade or give themselves more distance from the original entry boundary to reduce the effect. Losses are a fact of life, but they can be easily kept to a minimum while maximizing your profits with proper stop management.
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).