Trading Review for 2/1/2000
The market rally continued today, but many stocks were stuck in trading ranges (obviating many entries and offering only fractional gains/loss on others). This is setting up a potentially volatile time tomorrow after the Fed announces its interest rate decisions.
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:
Volatility Compressions
CRA opened at 200 and fell to 188 1/2 before staging a rebound to a high of 214 and then selling off to 205 and rallying back to close at 221 1/2
AFFX opened at 231 and ran up to 237 before selling off to 225 5/16 and closing at 229
ETEK opened at 182 11/16, fell to 169 3/4, and then bounced back to 186 3/4 to close at 179 3/4
Volatility compression trades are, well, volatile. But they offer the attentive trader significant profit potential.
CRA triggered traders long at the 212.8 upper boundary only to be stopped out for fractional gains. Aggressive traders reversed at the failed 212.8 boundary and picked up about 7 points. It again triggered longs at the 212.8 boundary in the afternoon for 8 points profit.
AFFX gave aggressive traders a reversal entry at the failed rally near the 237.9 upper boundary for a 11 point profit. More conservative traders were offered no trade today.
ETEK offered no good entries as it swung well within its boundaries.
Trading Range Patterns
WHIT opened at 36 3/16, fell to 36, and then quickly rebounded to 38 1/2 to close at 37
USWB gapped open to 29 3/4, but fell back to 29 before staging a rally to 31 13/16 and closing at 30 3/4
PRIA gapped open to 69 1/2, sold off to 67, and rallied back to 70 1/8 to close at 69 3/4
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
WHIT triggered long on as the 36.2 boundary was crossed for about 2 points profit.
USWB gapped over the 29.4 upper boundary (but still within 1/2 point) triggering longs at between 29 and 29 3/4. The drop to 29 did not stop these entries out and rewarded traders with 1-2 points profit when the stock rallied back.
PRIA triggered shorts at the 67.9 lower boundary but ultimately stopped traders out for fractional losses.
Mutliday Patterns
The top three Multiday Pattern stocks were the same as the top three Trading Range Pattern stocks for today:
WHIT opened at 36 3/16, fell to 36, and then quickly rebounded to 38 1/2 to close at 37
USWB gapped open to 29 3/4, but fell back to 29 before staging a rally to 31 13/16 and closing at 30 3/4
PRIA gapped open to 69 1/2, sold off to 67, and rallied back to 70 1/8 to close at 69 3/4
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
WHIT triggered long on as the 36.2 boundary was crossed for about 2 points profit.
USWB gapped over the 29.4 upper boundary (but still within 1/2 point) triggering longs at between 29 and 29 3/4. The drop to 29 did not stop these entries out and rewarded traders with 1-2 points profit when the stock rallied back.
PRIA triggered shorts at the 67.9 lower boundary but ultimately stopped traders out for fractional losses.
Breakthrough Momentum
VIGN opened at 194 1/2, sold off to 178 3/4, and then staged a remarkable rally back to 200 5/8 before closing at 191 5/32
JDSU opened at 204 3/4, sold off to 195, and also rallied back to 206 1/2 before closing at 202
YHOO opened at 319 7/16 and ran up to 324 before selling off to 310 13/16, it then also rallied back to 329 3/4 and closed at 317 3/8
VIGN triggered longs at the 197.3 upper boundary for 2+ points profit. Aggressive traders who risked the reversal at 178 3/4 picked up 10+ points.
JDSU gave short entry at the 198 lower boundary for 2 points profit.
YHOO triggered traders short at the 314.6 lower boundary for 3 points profit. Aggressive traders who risked the reversal near the 325.2 upper boundary scored about 12 points.
Momentum Intersections
CCBL gapped open to 23 3/8, sold off to 22, and then rallied back to 26 7/8 to close at 26
POWI opened at 36 13/16, rallied to 38 23/32, and then sold off to 36 1/8 before closing at 37 1/2
CMB gapped open to 82 7/16, fell to 81 5/16, and then rallied back to 84 1/2 before closing at 83 5/8
CCBL triggered traders long at the 24.9 upper boundary for 1-2 points profit.
POWI gave no entry points today
CMB initially triggered longs at the less than 1/2 point gap open above the 82 upper boundary, but traders were quickly stopped out for one point losses (note: conservative traders will ONLY trade when the price action trades THROUGH the price and not gaps beyond it - intermediate and aggressive traders will use the 1/2 point gap limit). CMB subsequently offered another long entry when the stock rebounded back through 82 for 2 points profit.
Trading Channel
From the Trading Channel Breaches group - VIGN, PMCS, VRTS
From the Near Trading Channel group - CLFY, SPOT, JPM
From the Narrow Trading Channel group - VERT, GLW, MSTR
From the Near and Narrow Trading Channel group - CLFY, ALTR
VIGN opened at 194 1/2, sold off to 178 3/4, and then staged a remarkable rally back to 200 5/8 before closing at 191 5/32
PMCS gapped open at 184 11/16 and fell to 181 before rallying back to 200 7/8, dropped to 195, and then rallied to close at 205 9/16
VRTS gapped open at 148 11/16, sold off to 141 7/16, and then rallied back to 151 1/4, dropped to just above 148, and then rallied to close at 154 11/16
CLFY opened at 121 1/2, sold to 116 1/4, rallied back to 120 and closed at 118 29/32
SPOT gapped open to 53 13/16, rallied to 54 1/4, and then sold off to 48 3/16 to finally rally into the close at 50 7/8
JPM opened at 122 7/8, rallied to 123 5/16, sold off again to 121 1/2, rallied again to 123 and closed at 122 5/8
VERT opened at 242 3/16, rallied to 252, sold off to 236 1/2, rallied back to 265 1/4, and closed at 252 1/8
GLW gapped open to 150, sank to 145 1/16, and then rallied back to 151 3/4 to close at 147 1/4
MSTR opened at 138 3/16, sold down to 124, rallied back to 134, fell again to 129, and rallied back to close at 132 3/4
ALTR opened at 66, sold to 63 1/16, bounced back to 67 15/16, fell to 66 1/2, and finally closed at 68 15/16
Trading channel trades can be simple and rewarding.
VIGN remained below its trading channel and offered channel traders no good entries
PMCS gapped open back inside its trading channel and initially triggered shorts at the 181.8 lower channel boundary, but traders were ultimately stopped out for fractional losses. Aggressive traders entered long at the reversal near the lower boundary and realized 18+ points profit. Traders who waited for the 193.9 upper boundary breach scored 6 points profit.
VRTS also gapped back into its trading channel and triggered shorts at the 148.1 lower boundary for 5+ points profit. Aggressive traders played the reversal at the 148.1 boundary in the afternoon and picked up 6+ points profit.
CLFY triggered shorts at the 121.3 lower boundary for a fast 4-5 points profit.
SPOT triggered shorts at the 52.2 lower boundary for a 3+ point profit.
JPM only offered aggressive traders a reversal entry at the failed rally just short of the 123.3 boundary for 1-2 points profit.
VERT triggered channel traders long at the 246 upper boundary for 4 points profit and again at the 246 boundary for 18+ points.
GLW triggered shorts at the 148.9 lower boundary for 2-3 points profit and again at the 148.9 boundary for 1 1/2 points profit.
MSTR also triggered shorts at the 137.1 lower boundary for 12 points profit.
ALTR offered short entry at the 65.6 lower boundary for about 2 points profit.
Breakout Patterns
BK opened at 40 11/16 and traded in a range between 39 5/8 and 40 1/2 until closing at 40 7/8
SBUX gapped open to 31 3/4, bounced off 32 1/4, and then traded in a narrow range around 31 7/16 until closing at 32 5/16
LHSP opened at 48 1/4, fell to 46 3/4, rallied back to close at 53 3/16
CAT gapped open to 42 3/4 and quickly shot to 44 1/16 before falling back to 43 and closing at 43 3/16
BK and SBUX offered no trade entry
LHSP offered a long entry at the 48.8 boundary for 3-4 points profit
CAT triggered a long entry at the 43.5 boundary which may have been hard for most to catch due to its speed - those that caught it were stopped out for fractional losses when it turned around abruptly at 44 1/16
Envelope Patterns
POWI opened at 36 13/16, rallied to 38 23/32, and then sold off to 36 1/8 before closing at 37 1/2
VRTS gapped open to 59 3/4, fell to 58 1/8, and then rallied to 62 to close at 60 5/8
ERICY gapped open to 76, fell to 74 9/16, rallied back to 80 1/2 to close at 79 15/16
POWI was stuck inside their envelope continuation/failure boundaries and offered no trade entries today
VRTS triggered lons at the 60.9 upper boundary for a 1 point gain
ERICY gapped too far above the upper boundary to trigger a trade, but subsequently came back and offered a good long entry at 75.1 for 3-5 points profit.
Of note to daytraders using the newly rolled out trading index feature - the top three performers in each index category offered traders the following profit opportunities today:
Under $50 - AVA (3 points), ANCR (5 point), WHIT (2 points)
Under $100 - SAPE (5 points), FFIV (4 points), EMLX (1 points)
All - OCLI (20 points), VERT (10 points), CRA (15 points)
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 when a reversal occurs (such as adding one point to the reversal side of the trade 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).