Trading Review for 2/22/2000
The anticipated bounce (could just be a dead cat bounce) occurred today. With the VIX pulled as high as it was, some kind of bounce was inevitable. However, there didn't appear to be a lot conviction behind it as traders approached the bounce cautiously. The next couple of days will tell whether investors and traders are prepared to believe in the rally and put their money where their belief is.
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 today's trading action relative to the top Trade Prospector signals:
Volatility - Volatility Compressions, Trading Range Patterns, and Multiday Patterns
SDLI Gapped well beyond its upper boundary on news of an acquisition and then sold off giving a long entry at the 329.5 upper channel boundary for about 4 points VITR Popped through the 194.9 upper boundary for 5 points and then sold off through the 178.8 lower boundary for 12 points CMDX Traded slowly all day until crossing its 122.9 upper boundary and then soon hockey sticked north for a 36 point profit PUMA At 117 (just beyond the 116.9 upper boundary) triggering longs for a quick 2 points in the morning. It then sold off ultimately bouncing short of the 110.1 lower boundary and rallying again through 116.9 for abother 2 1/2 -3 points VIGN Dropped briefly through its 205.5 lower boundary triggering in and out of fractional trades. It then proceded to rally through its 214.9 upper channel boundary for 3 1/2 points. Playing the reversal at 205.5 was worth 13 points. VERT Couldn't even get through its 203 SR3 directional swing price and sold off in an oscillating fashion until triggering short trades upon falling through its 195.3 lower boundary for 3 points. RMBS Fell through its 135 lower boundary for 3 points and then rallied through its 147 upper boundary for another 40 points profit NTAP Triggered shorts at the 165.9 lower boundary for 2 1/2 points ETEK Rallied through its 207.1 upper boundary for 4 points, then reversed and sold off bouncing off just short of its 203.9 SR3 directional swing price and ralled back through 207.1 again triggering longs for another 11 points CHKP Sold off through its 194.4 lower boundary for 13 points
Momentum - Breakthrough Momentum and Momentum Intersections
SAWS Triggered a failed momentum reversal trade at its 65.5 failure boundary for about 8 points AXP Bounced wildly within its boundaries - no trade (but perhaps one to keep on your watchlist for a day or two) NTLI Continued its downward momentum through its 83.5 continuation boundary for about 3 points LIPO Poked its head briefly above its 13.8 momentum failure boundary and triggered in and out of a fractional trade.
Trading Channel - Channel Breach, Near Trading Channel, and Near/Narrow Channel
SDLI Gapped well beyond its upper breakpoint on news of an acquisition and then sold off giving a long entry at the 329.5 upper channel boundary for about 4 points AMCC Sold off through its 211.4 lower breakpoint for 21 points and then rallied back just touch its 228.9 upper breakpoint twice (falling back each time), Picking up and risking the reversal back through the 211.4 lower breakpoint was worth an extra 17 points. VERT Couldn't even get through its 203 SR3 directional swing price and sold off in an oscillating fashion until triggering short trades upon falling through its 195.3 lower boundary for 3 points. CKFR Fell back into its trading channel and then rallied out of it twice - first for 4 points and again for 6 points MSTR Gapped below all of its boundaries and didn't recover - no trade SNDK Sold through its 145.4 lower channel boundary for 3 1/2 points QCOM Briefly rallied through its 134.7 upper channel boundary for 1 point and then reversed and fell through its lower breakpoint at 131.5 and lower channel boundary at 127.2 to bottom at 126 1/4 and ultimately bounce back to near its lower breakpoint. The short at the lower breakpoint was worth 5 points, the reversal back through the lower channel boundary was worth another 4 points CMVT Sank below its 176.5 lower channel boundary and triggered shorts worth about 6 points NSOL Crashed through its 282.3 lower channel boundary for 20 points
Envelope - Breakout Patterns and Envelope Patterns
NVDA Bounced wildly within it boundaries - no trade GZTC Gapped 1/4 point beyond its envelope continuation boundary triggering longs worth almost 7 points SNPS Oscillated within its boundaries - no trade CMCSK Also oscillated like a sine wave inside its boundaries - no trade PCLN Rallied short of its downward envelope failure boundary and then resumed its downward movement through its 50.4 continuation boundary for 2 points FDC Another stock wildly oscillating within its envelope boundaries - no trade
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).