Michelle B submits: I remember reading about a French housewife who when asked by her husband every morning what they would be having for dinner would always give the same tireless reply: “It depends on what jumps into my market basket.” Some traders prefer to trade from a prepared watchlist. For me, trading is interesting because I do not know what will jump into my market basket. My preparation is my confidence in my ability to execute perceived opportunities according to my risk parameters.

Using the premarket top gainers/losers scan, I search the NASDAQ, NYSE, and AMEX market stalls for any tasty morsels and look for any stocks moving on the highs/lows scan. I also check Briefing.com and MarketWatch Newsfinder for news that has happened since the close of the previous trading day—identifying which stocks the market considers to be newsworthy is one of the many trading skills which can be developed.

In addition, I note via Briefing.com calendars such events as economic reports, earnings, Fedspeak, splits, upgrades/downgrades, and conferences. Usually, I have around ten to twelve trading candidates. Sometimes, there are none or a very small number. In that case, I patiently wait until the market has a new batch of fresh candidates—I will not make do with stale merchandise.

I list the stock symbols of my candidates and the important economic events for that day in my journal. Next to each stock symbol, I put the results of my basic Yahoo financial research—reason for price movement, float size, and short interest. I identify support and resistance on various timeframes. Sometimes, I check Yahoo Finance message boards and blogs to find out why a stock may be moving. Though in that case, I am always on my guard to weed the chaff from the wheat.

Then, I place my candidates on the chart pages of my Advanced Trading Platform (ATP). Four thirty-minute charts go on pages two through four. The main page contains the following windows: order entry, order status, real time portfolio, high/low scan, top gainers/losers scan, watchlist containing, in addition to my trading candidates, the major indices and technical indicators like VIX and TICK. Last but not least, is a chart window for the most promising candidate.

Discovering that ININ—set to gap up because it has given higher earnings’ guidance—has a very small float and moderately high short interest, coupled with my knowledge that such stocks often move very strongly on low volume days, like Fridays, pre-holidays, and summer days, makes ININ the star attraction at this stage.

The market opens, and since I am particularly interested in seeing if ININ can trigger a trade, it gets top attention with a one-minute chart (above) on my main trading page. Meanwhile, I am flipping through my chart pages to see if anything is close to triggering—nothing yet. I check the one-minute chart of ININ, and I see the choppy pennant being formed at 10 A.M. The pennant range is around .25. That’s enough of a sign for me to buy half of my lot as close to the bottom of this formation at 13.65. Buying a partial lot before the actual breakout happens makes sense in high-probability trades, especially if the desired lot size is substantial. I am set to buy the rest via an automatic buy stop if it can clear the top of the pennant at 13.87 on the 5 minute (see below). Trades moving strongly in the morning require monitoring via shorter time frames.

Fifteen minutes later, it does, and my full lot is in, average cost around 13.78. Just before the breakout, the pennant was around seventy-five percent completed and the volume dried up. Triangles/pennants need to be not completely formed or else they usually just fizzle out and do not support strong breakouts. The pause in volume is what my trading buddy calls a lullipop, a lull before the breakout, where the equilibrium between buyers and sellers end and the buyers take over.

Part of my prepurchase research of ININ was its support and resistance based on weekly price level resistance. Since the open of the July 24, 2006 weekly, bearish, high-volume candle was 14.81 (see below), therefore trapping lots of traders at that level, I determined the resistance to be around 14.80. The target of 14.80 also matches the length of the pole on which the flag formed on Friday’s intraday charts, forming a measured move and confirming the resistance.

As the ININ trade continues, I am monitoring the price action on different timeframes, and have my mental stop under the flag for the first half lot at 13.53 and then just above the flag at 13.89 for the complete lot. Price is smoothly rising—each candle opens near but not with much overlapping to the close of the previous candle. I put my sell limit in for the full lot just under the target price. My offer gets lifted fairly easily, and I am out with a $1.00 move gotten in about 40 minutes. Since the risk was .25 for the complete lot, it was a +4R trade. For quickly moving stocks, I will often forgo hard stops, but it is a risk because my net connection could be interrupted. Then my carefully constructed trade will exist only in cyberspace floating without my pilotage. So, I am working on the artful science of consistently setting hard regular/trailing stops with upper triggers via bracketed orders to take care of that possibility.

My market basket is now empty until the next fresh thing jumps into it.