Trading Review for 2/8/2000
Lot's of volatility and big gains for those who played the breakouts (especially those in the volatility indicator groups). Market action seems to be signalling a possible short term top or at least a profit taking selloff soon.
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
PMCS gapped open but ultimately gave traders a couple of long entries at the 270.3 boundary for about 8 points
VIGN triggered longs at the 200.9 upper boundary for 20 points
SNDK triggered longs at the 148.7 upper boundary for 7 points and then later at the 142.9 lower boundary for 2 points - trades who also risked the reversal as the stock fell back through the upper boundary gained an extra 5-6 points
CMRC gave a long entry at the 172.4 upper boundary for 1 1/2 points - traders who risked the reversal as the stock fell back through the upper boundary picked up another 7 points
Trading Range Patterns
NSOL gapped lower but ultimately gave long entry at the 257.5 upper boundary for 8 points - traders who risked the recovery from the gap open as the stock price came back through the lower 247.3 boundary gained an extra 10 points
INCY reversed off the 142.7 upper boundary and ultimately fell through the 136 lower boundary - breakout traders picked up 10-11 points while reversal players gained an extra 5 points
ADAP triggered a long entry at the 114.8 upper boundary for 20 points
Mutliday Patterns
NSOL gapped lower but ultimately gave long entry at the 257.5 upper boundary for 8 points - traders who risked the recovery from the gap open as the stock price came back through the lower 247.3 boundary gained an extra 10 points
INCY reversed off the 142.7 upper boundary and ultimately fell through the 136 lower boundary - breakout traders picked up 10-11 points while reversal players gained an extra 5 points
ADAP triggered a long entry at the 114.8 upper boundary for 20 points
Breakthrough Momentum
VNWK triggered longs at the 51.4 upper boundary for 3 points
GILD gave an initial failure trigger at the 53.8 lower boundary but quickly recovered and stopped traders out for one point - later it gave a long trigger at the 57 upper boundary for 2 3/4 points
VOD gapped open beyond the entry level - no trade
Momentum Intersections
VNWK remained within it's momentum intersection trading boundaries
VDAT exactly bounced off it's upper 14.5 boundary and then fell through it's 12.8 lower boundary before bouncing around the rest of the day - reversal players picked up 2 points and breakout players saw a fractional gain
ADBE triggered a long entry at the 78.2 upper boundary for 5 points
Near Trading Channel
BGEN gapped open fractionally above it's trading channel but quickly fell back into the channel - it later gave a good long entry at the 98.4 upper boundary twice - once for 1 1/2 points and again for 1 point
SOFN gapped well above it's trading channel and closed up over 8 points - no trade
AOL remained trapped in it's trading channel - no trade
Near and Narrow Trading Channel
SOFN gapped well above it's trading channel and closed up over 8 points - no trade
Breakout Patterns
ISSX gave traders 1 point at it's 74.9 upper boundary and a fractional loss at the 71.9 lower boundary
XLNX gapped above it's upper boundary but quickly retreated and triggered shorts at the 59.3 lower boundary for 1 1/2 points - it later bounced off the 60.5 upper boundary giving reversal players a 2 point opportunity
GDT initially triggered longs at the 67.4 upper boundary for 1 point and then sold off - reversal players picked up 3 points as the stock price fell back through the upper boundary
Envelope Patterns
AFCI gapped beyond the 48.1 upper boundary - if you nevertheless risked taking a long at the 49 5/16 low you were rewarded with 9 points for your daring (aka gamble)
ATML gapped beyond it's upper boundary and then quickly sold off remaining within its boundaries for the rest of the day
WLA triggered longs at the open at the 97.6 upper boundary for 2 1/2 points
Of interest to trend traders - from the 20% pullbacks group, GENE (1 point), PEB (2 points), ASYT (1 point)
Of note to daytraders using the trading index feature - the top performers in each index category offered traders the following profit opportunities today:
Under $50 - CORR (range bound), CNET (range bound), VTSS (3 points)
Under $100 - RHAT (1 point on breakout, 3 points on reversal), FFIV (2 1/2 on breakout, 2 points on reversal), ERTS (4 points)
All - ITWO (15 points on reversal), BRCM (7 points), AFFX (18 points), YHOO (17 points)
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).