Trading Review for 2/7/2000

The market appears to again be showing signs of congestion - a condition usually followed by high volatility and breakouts or breakdowns in the price action.  As always, we trade what the market does, not what we think it should do.

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

SDLI remained trapped within its boundaries - no trade

VRSN gave traders more than one opportunity to grab 1-2 points below the 182.5 lower boundary

SNDK reversed exactly off the 149.1 upper boundary and gave traders who caught the reversal 3-4 points

MERQ gave two good long entries at the 135.5 upper boundary for a total of 6-7

CMRC gave up 6 points on longs at the 164.8 upper boundary

Trading Range Patterns

VERT gave a quick short entry at the 223.8 lower boundary for 3 points - the reversal off the 234 upper boundary was worth another 10 points

RHAT gave a good short entry at the 91.3 lower boundary for about 4 points

MERQ gave two good long entries at the 135.5 upper boundary for a total of 6-7

 

Mutliday Patterns

VERT gave a quick short entry at the 223.8 lower boundary for 3 points - the reversal off the 234 upper boundary was worth another 10 points

RHAT gave a good short entry at the 91.3 lower boundary for about 4 points

TMPW allowed a quick short at the 151.9 lower boundary for 3 points

 

Breakthrough Momentum

MEDI gapped above the upper boundary and remained there permitting no trade entry

SAPE momentarily bounced off the 93.1 upper boundary and reversal players were given 5 points

MNMD range traded within its boundaries - no trade

Momentum Intersections

INSO congested just short of its 11.6 lower boundary and ran through its 13.1 upper boundary - boundary players picked up 1 and reversal players picked up 2

CL triggered shorts at the 55.8 lower boundary good for about 2 points

MTC range traded - no trade

Near Trading Channel

LRCX gave a good long entry at the 137.2 upper boundary for 4 points

OMPT immediately triggered longs at the 115.9 upper boundary for 6 points

INTU remained trapped in its trading channel - no trade for breakout players, 2 points for reversal players

 

Near and Narrow Trading Channel

VOD gapped too far below its trading channel to permit a trade entry

FITB triggered shorts at the 62.2 lower boundary for 1 1/2 points

 

Breakout Patterns

WAXS remained trapped within its boundaries - no trade

MMM triggered shorts at the 88.5 lower boundary for about 2 points

STI also triggered shorts at the 54.4 lower boundary for 1 point

Envelope Patterns

LHSP gave an encredible long entry at the 61.1 upper boundary that yielded 23 points

TKLC remained trapped within its boundaries - no trade

CORR gapped open, but for those traders willing to risk the extra 3/4 points on the above the 41 upper boundary, your risk paid off and rewarded you with 13 points

 

Of interest to trend traders - from the 20% pullbacks group, CRA (23 points profit), PEB (1 point profit), VERT (12 points on the failed rally near the upper boundary)

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 (3 points on trading channel)

Under $100 - RHAT (3 points), FFIV (6+ points on reversals), SAPE (3 points on reversal, 1 point on breakout)

All - ITWO (2 points on breakdown and 12 points on reversal), NSOL (about 20 points on multiple breakdowns), AFFX (30-40 points on multiple breakout entries)

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).