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.

Post from: Trader Mike

ININ, An Anatomy of a Friday Morning Daytrade

What’s your take on this record setting dow day as the ratio of up volume to down volume at each exchange was so poor? nyse: 7:9, naz: 8:10, amex: 1:3. Appears the headlines wont be telling the whole story.

My response was that, like I’ve been saying the past couple of days, the small and mid-caps aren’t participating in the fun. I have no idea why the whole world is so fascinated with 30 stocks (the Dow) when there are thousands of others that tell you the real story of what’s going on in the markets. Oh well, I guess that’s why I’m not on CNBC — I don’t believe the hype.

I guess I should feel lucky to have escaped with a nice little gain today from nothing but shorts. DGX turned out to be my big winner for the day, although it should have been much bigger. As you can see on the daily chart, it had a nice gap to fill right a the psychologically important $50 mark.

Even though I knew (I thought I knew) that it was headed for $50, the market action persuaded me to exit earlier than I had originally planned. I entered at 10:41, right after it broke under $54. The entry was a little early because it was still above the low of the previous candle. But I took it because I really like to short under whole numbers, which are typically resistance. So I thought I’d roll the dice on the entry and get a tighter stop and thus be able to short more shares. I covered half just after noon at $52.40 as the indices started to follow through on their earlier strength. I planned on holding the rest until the close with a loose trailing stop but I got antsy and covered the rest at $51.71 at 2:10, just minutes before it tanked and hit $49.90.

On the bright side, I also covered my other three shorts (CNO, SEPR and ENDP), which weren’t working, just after noon and that saved me some money because all three would have hit their initial stops. So I ended up making 2.78R (2.09%) on the day thanks to the 3.78R (2.84%) gain in DGX.

I took advantage if the clues from $TICK in deciding to bail on the shorts at noon. It kept spiking over 1,000 and that convinced me to bail, despite some other bearish signs I saw, like my moving averages and the A/D line.

Anyway, enough of that intraday minutia, here are charts of the Nasdaq, S&P 500 and Dow. As much as I want to be a short term bear this week, the indices appear to have completed normal retracements and seem ready to push higher. Of course, we could just chop around until Friday’s jobs report. Time will tell…

No changes…

Post from: Trader Mike

October 3, 2006 Stock Market Recap

As far as day trades, AMD worked well for me. Trader X showed his trade in AMD off of a 15-minute chart. I entered above the 10:00 candle on the 30-minute chart. My risk was 22 cents and I made 53 cents on the trade for just over 2R. It might have been a really good one if not for that 1:00 selloff.

XMSR was the one that got away today. It was front & center on my eSignal this morning but for some reason I took it off my screen after 10:00 and lost track of it. What was I smoking??? Look at that beautiful entry above the 10:30 candle. It was only 20 cents of risk and it would have made $1.06 if I’d held until the close.

Here’s the Nasdaq:

These last few days look so similar that nobody even noticed that I accidentally re-posted the S&P chart from the 18th yesterday.

No changes today…

Post from: Trader Mike

August 22, 2006 Stock Market Recap

For those who care (Dave?) here are the trades I took today (all off of 30-minute candles)…

I jumped in XLNX above the 10:00 candle at 21.80. Initial stop was at 21.45, just below the low of the day. This ended up being a 1.94R winner.

Next was TRID. Again, I bought above the 10:00 candle with a stop below for 25 cents of risk. I got stopped out on the next candle for a 1.14R loss. As you can see it turned around after shaking me out. This could have been about a 3R winner assuming no partials along the way.

Then I bought NTLI at 25.02 after it broke the high of the 10:00 high and the $25.00 level which I thougt might be resistance. I was able to grab a partial on the next candle once I had a 2R gain and moved my stop to just over break-even on the remaining shares. I got stopped out shortly thereafter. I made 1.07R on this trade but this is another that could have been a 3 or 4R winner. Oh well…

Next up was RACK, I saw the super narrow 10:00 candle but thought it was too tight, so I set an alert for the high of the day. I got long at an average of 21.3, with a stop at 20.97, below the 10:00 candle. RACK produced 3.44R of profit. This is a case where the partials and the looser stop really held me back. This could have been an 8R winner with my wider stop and a 10R winner with the tighter stop.

FDX was another good one that could have been much better without the partials. I got long above the 10:30 candle at 101.07 with a stop below at 100.62. I really liked that 10:00 candle and once I saw oil rolling over after the inventory report hit at 10:30 I just knew Fedex would run. Still, even though I *knew* I still waited for my entry signal. I made 3.63R on FDX but left another 3R on the table due to the partial sales.

Finally, another dud — ISIL. I bought above the 11:00 candle @ 24.36 with an initial stop below at 24.15. It hit my trailing stop around 1 PM for a 0.52 R loss.

Like they say hindsight is 20/20. If I had it to do over again I’d probably do things exactly the same way, especially given how the market has been prone to roll over mid-day of late.

Obviously it was a good day to be long. I read a couple of people talking about how the market was overbought this morning and that they weren’t going to chase. I’m not sure how they determined that the market was overbought early in the day but even now it’s not overbought on my rather fast stochastic settings (5.3.3). We’ll probably hit overbought levels on most of the indices tomorrow. But even then, if this is a true breakout the market can stay overbought for a while. I don’t put a whole lot of weight on any oscilltaors in trending markets. Just my $0.02…

Here are the charts of the indices:

Nasdaq showed good strength today as it barely dipped below the upper Bollinger Band. It still looks like clear sailing to the 2200 area. I’m not saying that we’ll go straight there without any gyrations — just that there’s not a whole lot of resistance on the chart.

New 3-month highs for the S&P…

The Russell 2000 looks like it’s hitting the wall. The 200-day moving average, the Upper Bollinger Band and the August high are just above…

The Dow made a new closing high for the summer but didn’t quite make it above the August intraday high.

No changes today…

Post from: Trader Mike

August 16, 2006 Stock Market Recap

This was the day of the sympathy plays for me as I caught some nice moves in GameStop Corp. (GME) and Infosys Technologies (INFY). Each of those stocks was up in sympathy with another stock that reported good earnings today / last night, Electronic Arts Inc. (ERTS) and Cognizant Technology Solutions Corp (CTSH), respectively. That’s a switch for me because I usually try to focus on the actual stocks that had the news. I’ll have to change my typical modus operandi and track the sympathy plays. I finished the day with just over 6R (4%) of gains and those two accounted for 7.15R.

Despite the good day I’m frustrated because I should have made about double what I actually made. The first problem was that I missed an entry in Alcan (AL) right at 10:30 because my motherf$#%^&@!!! cable modem disconnected right at 10:29. (Thanks Comcast! Interesting that Kirk, in Minnesota and Ugly in Philly have the same complaints about Comcast. In fairness, they’ve gotten a lot better here since my whining from years ago.)

AL was on the list of gappers this morning. I simply waited for it to print a narrow canlde which I could get long above. It completed a 30 min. candle that was only 27 cents tall at 10:30. It traded above that candle while my internet conenction was down and by the time I got reconnected, only about 3 minutes, it was off to the races without me. That could have been a 6R trade if I held to the close and didn’t take any partial profits. More likely I would have gotten about 4R including a partial profit on the way up. Here’s the chart:

So that was the one that got away. Luckily I got my modem reconnected just in time to catch GME as it triggered. I first noticed GME on my gappers scan in CyberTrader. I knew ERTS was “in play” because of their earnings so I made sure to keep an eye on GME as a sympathy play. Classic dummy play here, long above the narrow 10:00 inside bar with a stop below for 21 cents of risk given my entry at 41.66. I took some partial profits on the way up and ended up making 4.35R on GME.

Next up was VPHM which turned out to be a dud with only a 0.47R gain. Again, I got long above the 10:00 candle (that little red inverted hammer). I took a partial at 9.20 when I saw a bearish note on Briefing.com and moved my stop to breakeven on the remaining shares just over breakeven.

INFY triggered next. Once again I got long above the 10:00 candle and took partial profits on the way up. This one ended up giving me 2.8R.

Here’s where the fun began. I jumped in ALVR as it raced above the 10:30 and 11:00 candles. I mistakenly bought twice the number of shares that I should have and by the time I noticed the stock was down a few cents from my entry price. I had to bite the bullet and dump those extra shares. After I did that I (foolishly) decided to move my stop up 1 cent from where it was, at 6.35, the low of both the 11:00 and 11:30 bars. I did that b/c there were a lot of buy orders at 6.35 and I just wanted to make sure that I wouldn’t get hit with a lot of slippage since I already took a hit on those extra shares. Of course the stock traded right to 6.36, took me out and reversed on a dime. There was potential for another 2 to 3R or so. Combine that with the 1.4R loss I took on it and there’s another missed 3 to 4 R on the day.

Lesson learned, I’ve got to be more careful with my lot sizes. I seem to do this once a month in one form or another. (What’s that Ugly writes every day about having it within me to damage my account?)

My final trade was STJ, which resulted in a 0.05R loss. STJ was another gapper, which was up on some Medicare and Medicaid news or some such (whatever!)… I got long above that 11:30 hammer & moved my stop to break-even once it reversed under 39.

So there you have it. A good day but it could have easily been much better.

Post from: Trader Mike

Frustrated After One of My Best Days of the Year

I was way ahead of this one and I tried to short it below the bid. But a few seconds pass and a few orders and suddenly the bid becomes the ask and the bid drops without my order being filled. I hate shorting NYSE - Nasdaq orders happen instantly. I guess it just takes more finesse.

I also hate shorting NYSE stocks. They can be very tough to catch. In fact, I couldn’t get filled on ELN today as it hovered above 17. I know I would have gotten filled on the Nasdaq. But I actually managed catch TIE today at just about the same time Ugly tried to short it. The thing about shorts, even on the Nasdaq, is that with few exceptions, you need the stock to uptick to get filled. Because of the speed of Nasdaq is usually much easier to get filled once something upticks. On the NYSE, you’re at the mercy of the specialists.

There are a few things that I do to compensate for the NYSE’s slow a$$ fills. I think all of you know that I almost never use limit orders because I’m more interested in getting filled than saving a penny or two. Market orders (are supposed to) get priority over limit orders and therefore are usually quicker to get filled. However, shorting NYSE stocks is the one time that I’m much more likely to use a limit order. But if the stock isn’t in free-fall and the spread is tight I’ll try a market order first. If it takes more than 10 seconds to fill and/or the stocks starts running away from me (dropping) I’ll cancel the order and watch for another chance (a bounce) to enter. I’ll often just enter a limit order at or just below my original target entry price. Or, if the stock hasn’t dropped too much I’ll follow it down with a limit order until it gets filled or it’s dropped too far.

On the more volatile stocks, like TIE, I’ll try to enter a little early, before it breaks support. That’s what I did today with TIE. I saw it teetering about 5 cents above the low of the 11:00 candle. (see the chart below) I figured it would hit an air pocket if it broke that support. (You don’t get upticks in an air pocket.) The stock had basically been going sideways for several minutes so I just went ahead shorted it above support. That gamble paid off because it did indeed hit a little air pocket a few minutes later.

Because of the uptick rule it’s tough to short a stock right when it breaks support, unless it’s very liquid. The NYSE makes it even tougher. There are things you can do to increase your chances of getting filled but sometimes you’re just S.O.L. I think that was the case with Ugly today. It made sense to try to short it under the bid. I’d say it was just bad luck that he didn’t get filled. This is why so many day traders focus on Nasdaq stocks.

Here’s today’s intraday TIE chart:

P.S. After I posted this I noticed this old post of mine in the ‘related posts’ section below. This was a juicy NYSE short that I couldn’t get filled on back in 2004.

Post from: Trader Mike

Shorting NYSE Stocks

Although I know all (most) of us short-term traders are watching the same 5 stocks on any given day I was amused to see that Jamie’s two trades of the day were two stocks that I also traded today — BRCM and Apple Computer Inc. (AAPL). (I also picked up some AAPL in my long-term account. Let’s see if it can make new highs…) I knew that Apple’s news today was huge (some would say ‘game changing‘) so I made sure to watch it closely. Although I don’t use price targets I always check the daily chart to see what kind of potential a move could have. There were still a few points for Apple to reach its 50-day moving average so I figured it was worth trying to ride it there. (Don’t tell the fundie guys but it closed pretty much right on the 50 DMA.) Here’s the daily chart of Apple followed by an intraday chart (15 minute bars).

If there was one thing for the bulls to complain about today it was the lack of volume to go along with new highs on the Nasdaq and S&P 500. I don’t think that’s a major concern though, since On Balance Volume still looks good on those indices. SO barring some (bad) news I still think the upper Bollinger Band on the S&P will get tagged.

Here are charts of the Nasdaq, Nasdaq 100 (NDX), S&P 500 and the Dow:

Post from: Trader Mike

April 5, 2006 Stock Market Recap

Typically (for longs) what I’m looking for is a buyable pullback to support. That support may be a trendline, moving average, multiple moving averages, straight line support, gap support, a Bollinger Band touch, etc. When I scan for reversal candlestick patterns I take note of the ones that are near one of those forms of support. And oversold stochastic is always a nice plus. (Reverse everything I just said for shorts.)

I caught a couple of big winners today in stocks that were on my swing list. Obviously they don’t always work out this well. First is Novellus (NVLS). I began tracking NVLS by adding it to my TeleChart watchlist after that first gap in January. Had I missed the gap during the day I would have found it when I ran my %b scan, which finds stocks outside of their Bollinger Bands. The stock gave one of my favorite setups a couple of days later as it bounced off of the top of the gap. But since earnings were around the corner I wouldn’t have entered a swing trade then (but that’s just me). So as you see it gapped up post-earnings and was once again above the upper Bollinger Band. Once again I noted it in TeleChart and just kept watching it daily, waiting for an entry point.

I’ve circled a couple of hammers on the chart that may have given small gains if one managed their stops effectively. Over the last week NVLS kept popping up in various scans of mine — doji, NR7, 50-day moving average cross. Noting that it might rebound over the 50 DMA, that it closed the first January gap and it gave a stochastic buy signal I made sure to set an alert for NVLS. I would have taken the entry yesterday if the overall market wasn’t so weak.

The case of Lam Research (LRCX) is similar to NVLS. It also gapped up, above its upper Bollinger Band post-earnings. I’ve been tracking it ever since. It gave a nice entry two days later as it made that harami cross right at the top of the gap. Stocks that are showing this kind of strength will often walk up their upper Bollinger Bands just as LRCX did for the next 4 days. So anyway, fast forward to the end of January and you see that it made a doji (caught by my doji scan) right on the support from the earnings gap and just above the 50-day moving average. (hmm) Yesterday it made a bullish engulfing (double hmm!)

I missed CYMI today for a day trade since I didn’t see an entry I liked after 10:30 (I was waiting for th oil report before I began trading today) but it’s similar to the previous two examples:

Here’s RACK, which I bought in my IRA a couple of weeks ago. Same old boring story, a strong, trending stock that pulls back and makes bullish candles:

Duru pointed out WIRE to me today as he marveled at how it regained its post-earnings highs. Somehow this one got past me but if I was paying attention I would have caught that hammer-like candle after the earnings gap:

There are a lot more examples in the archives. Other than the ‘chart requests’, almost all of the posts in the Chart Reading category contain examples of stocks that I found via my scans.

I also get asked for my actual scans [Telechart calls them Personal Criteria Formulas (PCFs)]. If you have TeleChart you can download the scans from my server. Be careful when you do the import though. TeleChart will ask you which parts of that file you want to import. You probably only want to import the scans. If you import that entire file you’ll wipe out your tab settings. So you may want to back up your setting before importing.

Of those scans the ones I use the most are:

• %b - I look at values below zero, around 0.5 and above 1.0 to find stocks around their lower, middle or upper Bollinger Bands, respectively.
• The first 9 candlestick PCFs. You may want to tweak the formulas. I use 5 day extremes to define the candles. For example, a candle with the shape of a hammer has to make (at least) a 5-day low in order to show up in the scan results. A shooting star would have to make (at least) a 5-day high…
• NR5 - Narrowest range in 5 days
• NR7 - Narrowest range in 7 days
• Recent New High - stocks which have made a new 52-week high (250 days) in the last 10 days. Often catches pullbacks from new highs.
• Swing High 2 and 3 - stocks which have made a new monthly high (21 days) and have made 2 or 3 lower highs.
• Swing Low 2 and 3 - stocks which have made a new monthly low (21 days) and have made 2 or 3 higher lows.

Post from: Trader Mike

Swing Trade Setups & Scans

I went long in WITS on Wednesday morning. It was up strongly early thanks to its earnings report the night before. Once it triggered an NR7 alert on my Trade-Ideas scanner I took a look at the chart and loved what I saw. It had pulled back from the highs and was trying to bounce off of 22. (Those round-numbers often act as support/resistance.) So I just set my alert and waited for it to trade above that NR7 candle. This trade turned out to be a 2.53R winner.

SEPR was on my screen from the day before when it had a big move. I got shaken out of SEPR for a 1.22R loss as the mid-day market weakness dragged SEPR down. This one would have been a nice winner later in the day. Oh well…

I saw a note about RIMM on Briefing.com at 11:11. It was already in motion on the ‘news’, which was unconfirmed at the time. I saw a decent spot to jump in with about 75 cents of risk. This one turned out to be a 3.16R winner.

On Thursday I tried a trade in MRVL based off of a swing trade setup. My alert triggered right at the open as it took out Wednesday’s high. In my haste to get long I really miscalculated the distance to my stop and therefore bought too many shares. I realized this almost immediately while entering my stop loss. I thought about just closing it out but since it was still hanging tough and it never dropped under a 1R loss I held on. Once it shot above 69 I decided not to press my luck and I got out just in time for the (always on time) 10:00 reversal. I was thrilled to escape with a 0.85R gain.

As the market weakened on Thursday I started looking for shorts. AAPL, which is always on my screen, appeared to be setting up for a break of support. I jumped in once it broke $74. This was a 2.85R winner.

And finally, here’s a short of GOOG that I took Friday morning. I usually don’t trade at the open but given the way GOOG closed on Thursday (plunging under $400) and the WSJ article about their earning miss that was out Friday, I decided I’d better jump in quick. (I can’t believe that nobody was talking about that article on Friday!) I was watching support levels on the daily chart and decided to bail once it bounced back over $375, thinking that the support there would hold for the rest of the day. This turned out to be my big winner for the week with a 4.43R gain.

After I covered GOOG, I decided to push my stops on my other 2 shorts, AAPL and FOSL, to just over break-even. Those stops got hit pretty quick and I decided to call it a week. I figured I should end the week on a high note and didn’t want to risk doing something stupid. Plus I’m always mindful of the payout/payback cycle.

Post from: Trader Mike

Trades of the Week (February 1 - 3, 2006)

I was watching Google because of the swing setup I posted about yesterday. I entered at 414.82 as it broke through the low of the
10:00 candle. My stop was just above the high of the 10:15 candle @ 416.50. It was tough watching my quick gains slip away as the stock retraced during the day but as you can see being patient paid off. I covered half into the woosh down at 406.36 and held the rest until the close (with a much tightened stop).

I ended the day with a 5.91R gain in GOOG and a 5.98R (~3%) gain overall for the day.

Post from: Trader Mike

Trade of the Day: GOOG