Trading Review for 2/14/2000
The market had a minor reaction rally today as expected which could continue for several more days. We continue to watch the NDX for signs its overextension has reached a breaking point.
But, as always, we will trade what the market does - not what we think it will do. But we suggest all traders remain vigilent for further downside in order to avoid being sucked into a bear trap - and be sure all your long positions are hedged or protected with trailing stops.
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 Monday's trading action relative to the top Trade Prospector signals:
Volatility - Volatility Compressions, Trading Range Patterns, and Multiday Patterns
ITWO Triggered longs at the 252.7 upper boundary or 15 points CMRC Triggered longs for fractional gains late in the day at the 159.4 upper boundary ETEK Triggered shorts at the 198.8 lower boundary for 3 1/2 points SFA Was good for a 3 1/2 point gain on longs above the 102.7 upper boundary BEAS Triggered longs at the open at the 109.7 upper boundary for a nice 11 point move NKE Produced short trades at the 33.2 lower boundary for 1 point MNMD Was good for 1 1/2 points on longs above the 86.1 upper boundary SNDK Gave a long entry at the 153 upper boundary for 2 points BRCM Gave trades a short entry at the 166.7 lower boundary for 6+ points
Momentum - Breakthrough Momentum and Momentum Intersections
SLR Triggered short trades at the 68.4 downward continuation boundary for 3 points INCX Fell through the 24.2 momentum failure boundary for 2 points MACR Also fell back through the 67.1 momentum failure boundary for 2 1/4 points MRK Triggered a fractional short as it momentarily fell through its downward continuation boundary at 64.5 SPY The SPDRs bounced within their boundaries offering only a minor fractional short below 138.7 SCI Failed near the 72.9 upper boundary and fell through the 71 lower boundary - reversal for 1 1/2 points MSFT Gapped open above its downward momentum failure boundary, but fell back - reversal trade for 1 point
Trading Channel - Channel Breach, Near Trading Channel, and Near/Narrow Channel
VERT Gapped open and reversed short of its 220.8 upper BP and fell through the 209.8 lower BP - reversal for 20 points, breakdown for 9 points TMPW Gapped open and re-entered its trading channel above 146.5, but then fell back out triggering shorts for 13 points ENZN Fell through its 48.7 lower BP for 5 points YHOO Gapped open back within its trading channel above 172.5 but quickly fell back out triggering shorts for 8+ points ITWO Gapped well above it's 241.2 trading channel and blew through its upper BP at 252.7 triggering a breakpoint-based long for 15 points ERTS Triggered a fractional short when it peaked below its 81.5 lower channel boundary INTC Gave a couple entries at the 106 upper channel boundary - one for about 2 points and another for 4 points
Envelope - Breakout Patterns and Envelope Patterns
TQNT Gapped open and then fell back through it's upper envelope boundary at 257.8 and falling through its 241.1 lower envelope boundary - the reversal was worth 27 points, the breakdown 11 points RMDY Gapped open well beyond its 54.4 upper boundary, but it quickly sold off - reversal for 1 1/2 points CTAS Triggered a fractional long above the 40.2 envelope failure boundary BNYN Triggered a long at the 35.1 upper boundary for 5 points FOX Remained within its boundaries - no trade ANSR Was also trapped within its boundaries - no trade
Of interest to trend traders - from the 20% pullback group, DYN (1 point) - from the pullbacks to support group, QTRN (1 point), VO (1 point), MCRE (1 1/2 points)
Of note to daytraders using the trading index feature - Under $50 - SOFN (3 points on reversals), AXTI (5 points), Under $100 - FIBR (1 point), FFIV (6 points), All - CRA (6 points + 3 points on reversal), GSPN (15 points on reversal)
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).