Trading Review for 3/13/2000
Turmoil in Japan over night played havoc with US markets today - many traders were unclear which end was up. As a result, many trade candidates simply gapped open lower and were not worth risking trades today.
Remember, knowing when NOT to take a trade is at least as important as known when to take it. If the market (or at least the market in the stocks you're trading) is confused or making discontinuous movments (e.g., gaps), stepping back and watching is often better than plunging ahead at warp speed. There is no law that you must trade every day. Lot's of economic reports due out this week, expect further volatility.
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
EMLX Gapped much lower (below its lower breakpoint) and continued selling back into its trading channel below 197.1 - it triggered long trades when it rebounded back through its upper channel boundary for ip to 16 points BVSN Gapped much below its lower breakpoint it initially found support near its 236 SR and attempted a rally which failed and it continued its downward spiral - no trade through JNPR Also gapped much lower and while it found support above its 261.3 SR it was a no trade VRSN Gapped much lower like much of the Nasdaq, but it found support at its 221.9 lower channel boundary and rebounded - traders either played this as a reversal off 222 for uo to 21 points or shorted when the price action sold off in the afternoon back through the 231.9 lower breakpoint for up to 5 points NSOL Gapped lower at the open, but then continued its upward ramp triggering long trades at its 252.4 upper breakpoint for 3 points. Reversal traders may have risked longs when the price action found clear support just above the 239.4 lower breakpoint between 11:30 and 12:30 ET IMCL Gapped much lower and did not offer a good trade entry - no trade PEB Gapped much lower but rallied back into above its 111.1 lower trading channel boundary three times triggering short trades each time it fell out of the channel - first for up to 3 points, again for up to 3 points, and finally for up to 4 points CMVT Gapped lower back into its trading channel and ultimately triggered shorts at its 213.6 lower channel boundary twice for up to 3 1/2 points each time
Momentum - Breakthrough Momentum and Momentum Intersections
BGEN Triggered fractional short trades at its 79.8 downward momentum continuation boundary - but traders were stopped out when the support at this boundary stood up - look for a possible rebound tomorrow MOT Gapped lower and then rallied back only to meet strong resistance near its upper channel boundary and selloff throughout the afternoon - no momentum trade NSM Sold through its 68.3 downward continuation boundary for up to 3 points, it then rallied but fell short of its momentum failure boundary GOTO Gapped lower and then rallied but the rally exhausted near 60 and it sold off for the rest of the day - no trade NTRO Gapped well below its downward continuation boundary, but it found support near 85 and rallied back through its 101.2 momentum failure boundary for up to 8 points, when the rally exhausted and the downward momentum resumed, it fell back through its 99.4 continuation boundary for up to 14 points ATON Like most of the Nasdaq, it gapped much lower but quickly found support and rallied - no trade CPQ Gapped lower by about a point, but then rallied - however it did not break its 29.9 continuation boundary and was a no trade
Trading Channel - Channel Breach, Near Trading Channel, and Near/Narrow Channel
SDLI Gapped 25 points lower at the open and then rebounded - it failed to recover back into its trading channel, but it did rally above its 420.7 lower breakpoint - it then triggered short trades when the price action fell through the lower BP twice - first for up to 13 points and again for up to 15 points MEDX Gapped 22 points lower but managed to rally back above its 136 lower breakpoint three times - triggering short trades each time it fell back through it - first for up to 10 points, then for up to 6 points, and finally for up to 9 points JNPR Gapped much lower, but rallied back above its 269.8 lower breakpoint and finally triggered short trades when the price action fell through that boundary late in the afternoon for up to 5 points SNDK Gapped below its trading channel and lower breakpoint at the open, but rallied back through its 126.5 upper channel boundary triggering longs for up to 10 points PDLI Gapped below its trading channel and then rallied back inside it - it triggered short trades when it fell back through its 262.8 lower channel boundary for up to 10 points ARBA Gapped below its channel and during the last hour finally recovered to climb back into its channel and bounce off its 315.6 upper channel boundary and then fall through its 303.4 lower channel boundary - the reversal at the upper boundary was worth 17 points and the breakdown through the lower boundary was worth 5 points.
Envelope - Breakout Patterns and Envelope Patterns
IPIX Gapped much lower and recovered back inside its envelope boundaries, but when it broke down through its 41.6 failure boundary it triggered shorts worth about 3 points SGNT Gapped lower at the open but recovered and then traded within its boundaries - no trade PG Reversed its downward momentum but couldn't decisively penetrate its 57 failure boundary BA Reversed off its 31.7 sell entry boundary and rallied, but fell short of the 33.3 failure boundary AZN Triggered longs at its 40.9 entry boundary for fractional gains PBI Gapped lower at the open and then reversed - 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).