Trading Review for 3/7/2000
Oil futures prices skyrocketing plus Proctor & Gamble giving an earnings warning - what's that equal? Big time selloff on the Dow and SPX that finally even took the Nasdaq with it. The market is perched on a knife edge and it almost any bad news can send things into a tail spin - even the "new economy stocks". Be sure to manage your trailing stops and/or hedge your overnight positions.
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
CHKP Shot through its 247 upper breakpoint for up to 7 points and then just as quickly sold off back to its open price - when it again penetrated its upper breakpoint it rewarded traders with up to another 11 points VRSN Gapped 20 points lower on the news that it will buy NSOL for $21 billion in stock (a huge premium over its market cap of yesterday) - no trade and if you were long this position you were no doubt running for the fire hose TIBX A rollercoaster with a sharp drop at the end - First triggered traders long at its 114.8 upper channel boundary for up to 2 points and then triggered shorts at its 113.3 lower breakpoint which were stopped out for between breakeven to a fractional loss. It again triggered longs at the upper channel boundary which were stopped out for 0-1 point and once again triggered shorts at the lower breakpoint for up to 8 points. MLNM Gapped open beyond its upper trading channel boundary and then sold off for most of the day ultimately trading through its 257.9 lower breakpoint for up to 34 points CIEN Another rollercoaster - gapping open short of its 180.9 upper breakpoint it sold off through its 171.5 lower breakpoint for up to 8 points, it then rebounded and rallied back to near its opening price before again being hit with selling pressure which took it back down through its lower breakpoint for up to 5 more points TXCC This chart looks like the Rockies and is a perfect example of why close attention and properly managing your trailing stops is so important when trading these potentially volatility stocks - it first triggered traders long at its 102.1 upper channel boundary for up to 4 points, then after selling off back into its trading channel it again triggered long trades at the upper channel boundary for up to 7 points - it again sold off just short of reentering its trading channel and ultimately rallied through its 104.3 upper breakpoint for up to about 2 points - after once again selling off to just above its trading channel, it again rallied through its upper breakpoint for another 4 points VTSS Gapped open beyond its 97.4 upper trading channel and then sold off, ultimately falling through its 92.6 lower breakpoint for up to 6 points TERN Gapped 20 points beyond its 239.4 upper breakpoint and back into its trading channel. It triggered long trades when it traded through its 262.9 upper channel boundary for up to 7 points MEDX Gapped higher at the open and then sold off for the rest of the day, triggering shorts at its 188 lower breakpoint - traders were initially stopped out with 1-2 point gains and then after a failied weak rally, it again sold through the lower breakpoint and sank like a stone for another 7 points
Momentum - Breakthrough Momentum and Momentum Intersections
COMS Congested betwen its previous close and just short of its downward momentum continuation boundary without penetrating it, it then rallied hard back up and failed to successfully penetrate its momentum failure boundary. Aggressive traders who observed the strong support at the continuation boundary and risked a reversal trade grabbed up to 5 points, all other trades had no trade. CNXT Gapped higher at the open, but failed to penetrate its upward momentum continuation boundary and sold through its 101.3 failure boundary twice - first for up to 3 points and again for up to 5 points. SAWS Momentuim failed as it gapped lower at the open and sold off through its 64 failure boundary for up to 4 points - a subsequent attempt to mount upward momentum also failed and it again sold through 64 triggering a second short trade worth up to 4 points. The confluence of SR support at 58, lower probability boundaries at 58 and 59.4, and the 13 day EMA at 59 created strong support around 59 that kept the stock from falling further. SCMR Failed to sustain its upward momentum and was hit with a wave of selling from the open which took it through its 171.1 failure boundary for up to 2 points A Gapped open and then sold off (a familiar scenario today) - but it remained within its momentum boundaries - no trade NTRO Congested for the morning near its previous closing price while everyone waited to see if it would continue down through its 53.4 continuation boundary or reverse back through its 54.9 failure boundary - it finally reversed and traded up just through 54.9 and congested for about an hour around 55 until it spiked - if you exited on the first pullback you took away about 3 points for your patience - if you risked holding a breakeven stop, you didn't get hit and were carried up for up to 8 points. LCOS Gapped open but then sold off only to rebound 0.1 short of its 64.9 failure boundary and ultimately trade back through its 67.9 continuation boundary. It congested around 68 for an hours and then selling about 1:30pm ET initially stopped out traders for 1 point losses. If you closely watched the action, you got out at breakeven and waited for a penetration of boundary + 1 (68.9), otherwise you took the one point loss. Traders were again triggered long when the stock rallied about an hour later for up to 2 points.
Trading Channel - Channel Breach, Near Trading Channel, and Near/Narrow Channel
INCY Gapped lower and sold through its 230.1 lower breakpoint for up to 14 points VNTR Eventually rallied to just inside its trading channel at 204.7 only to fall back out triggering short trades for up to 5 points HGSI Gapped lower at the open to just above its 194.8 lower breakpoint and triggered short trades when it did penetrate it - if you took this trade you were rewarded with up 30 points by 10:30 am ET COMS Congested betwen its previous close and just short of its downward momentum continuation boundary without penetrating it, it then rallied hard back up and failed to successfully penetrate its momentum failure boundary. Aggressive traders who observed the strong support at the continuation boundary and risked a reversal trade grabbed up to 5 points, all other trades had no trade. TXCC This chart looks like the Rockies and is a perfect example of why close attention and properly managing your trailing stops is so important when trading these potentially volatility stocks - it first triggered traders long at its 102.1 upper channel boundary for up to 4 points, then after selling off back into its trading channel it again triggered long trades at the upper channel boundary for up to 7 points - it again sold off just short of reentering its trading channel and ultimately rallied through its 104.3 upper breakpoint for up to about 2 points - after once again selling off to just above its trading channel, it again rallied through its upper breakpoint for another 4 points VTSS Gapped open beyond its 97.4 upper trading channel and then sold off, ultimately falling through its 92.6 lower breakpoint for up to 6 points COHR Gapped higher and then sold off through its 89 lower channel boundary for up to 5 points BLDP Gapped higher and triggered long trades at its 123.1 upper channel boundary twice - first just barely triggering long positions and stopping traders out for 1 point and then late in the after noon giving back the earlier loss. PHCM Gapped higher and then sold off but remained within its boundaries - no trade QCOM Sold through its 133 lower trading channel boundary for up to 5 points
Envelope - Breakout Patterns and Envelope Patterns
GEMS Remained within its envelope boundaries - no trade JBL Gapped above its envelope continuation boundary and then sold off - it finally rallied back to trade through its 82.5 continuation boundary for up to 1 point TRW Remained within its boundaries - no trade MSTR Gapped lower but then rallied and traded through the breakout pattern long entry boundary at 225 for up to 43 points CHIR Gapped well beyond its breakout pattern long entry price and sold off finally falling through its failed breakout boundary at 67.4 for up to 4 points INHL Gapped well beyond its 118.8 long entry price and remained above it - no trade LNCR Triggered long trades on a false breakdown signal at its 22.6 failure boundary for up to 1 point, but then sold off back into its boundaries.
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).