Trading Review for 2/4/2000
As noted yesterday, the market still shows no commitment yet. The turmoil in the bonds and the mixed interpretations of the economic reports has a lot of people confused. It would be prudent to look out for another short term top over the next week.
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
CMRC gapped down and then rebounded, but then gave a short entry at the 163.4 lower boundary for about 5 points
CMGI hugged and finally reversed off the 125.9 upper boundary and fell through the 119.4 lower boundary giving reversal players 9 points and breakdown players 3 points
SAPE broke out through the 84 upper boundary giving traders a nice 8 points profit
TERN broke out through the 116.9 upper boundary and delivered 10 points
Trading Range Patterns
VIGN bounced around near the 204.9 upper boundary most of the day until it finally reversed and sank through the 194.7 lower boundary - reversal players picked up 10-11 points and breakout players gained about 3 points
MSTR bounced off the 151.5 upper boundary and ultimately fell through the 144.6 lower boundary - reversal players realized about 13 points and breakout players realized about 7 points
TMPW reversed off the 151.6 lower boundary to ultimately rally through the 158.1 upper boundary - reversal players gained 6-7 points and breakout players picked up about 1 point
Mutliday Patterns
VIGN bounced around near the 204.9 upper boundary most of the day until it finally reversed and sank through the 194.7 lower boundary - reversal players picked up 10-11 points and breakout players gained about 3 points
MSTR bounced off the 151.5 upper boundary and ultimately fell through the 144.6 lower boundary - reversal players realized about 13 points and breakout players realized about 7 points
TMPW reversed off the 151.6 lower boundary to ultimately rally through the 158.1 upper boundary - reversal players gained 6-7 points and breakout players picked up about 1 point
Breakthrough Momentum
YHOO initially rallied through the 365.3 upper boundary for 6 points profit and then reversed course falling back through the upper boundary and sinking to exactly the lower boundary before bouncing back - those traders who played the upper boundary reversal gained 15 points and those who played the lower boundary reversal gained 6 points
VRSN broke out through the 187.8 upper boundary for 7 points profit and then ultimately reversed and fell back through the upper boundary and sold off until late in the last few minutes of the session where it again quickly rallied to near the upper boundary - aggressive traders who traded the upper boundary reversal gained an additional 5 points
BVSN initially rallied fractionally through the 157.8 boundary which stopped out traders with a one point loss - traders who played the reversal however were rewarded with 7-8 points profit
Momentum Intersections
AWRE rallied through the 45.1 upper boundary for about 1 point profit
SAPE gapped beyond the 79.9 upper boundary and did not give an MI boundary breakout entry (however it did give a good long entry for a volatility breakout
WWCA traded in a narrow range within its boundaries
Near Trading Channel
MEDI gapped below its channel and fell 13 1/2 points - however because of the gap open, there was no channel trade entry
QLTI triggered long trades at the 76.6 upper channel boundary for 2 points profit
AXP remained range bound within its trading channel giving only a brief peak through the upper 163 boundary but stopping out traders for a fractional losses
Near and Narrow Trading Channel
AXP remained range bound within its trading channel giving only a brief peak through the upper 163 boundary but stopping out traders for a fractional losses
Breakout Patterns
CMVT rallied through its 165.3 upper boundary for a 7 point gain
BOBJ gapped open well above its 98.3 upper boundary and gave no good trade entry - however it is a perfect example of why we repeatedly warn against chasing a trade - after the gap open and a short upward continuation, it sold off for the rest of the day
NOK triggered longs at th 194.5 upper boundary but ultimately stopped them out for breakeven when it reversed and sold off the balance of the day
Envelope Patterns
CMVT rallied through its 165.3 upper boundary for a 7 point gain
BOBJ gapped open well above its 98.3 upper boundary and gave no good trade entry - however it is a perfect example of why we repeatedly warn against chasing a trade - after the gap open and a short upward continuation, it sold off for the rest of the day
MANU triggered longs near the open as it opened just below and then quickly rallied through its 51 upper boundary giving traders 5 points profit by about 10am ET
Of note to daytraders using the trading index feature - the top three performers in each index category offered traders the following profit opportunities today:
Under $50 - KING (6 points on a reversal), ANCR (5 points on a reversal), GBIX (1 point on a long and 2 points on a short reversal)
Under $100 - RHAT (0 - gapped too low for entry), FFIV (4 points on reversals), SAPE (8 points on breakout)
All - ITWO (10 points on channel breach), NSOL (7 points on touch and reverse off top of trading channel), CRA (11 points on reversal from lower boundary)
Knowing where to expect, and capitalizing on, reversals is a key profit making tool in the daytrader's arsenal.
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).