RMBS was In Play on Friday and we made some chops long on a slow summer day to its resistance, 17.80.  17.80 was an important technical level.  RMBS collapsed from this level previously (see chart below).  17.80 was an inflection point for us on Friday and on Monday.  And we made money on both sides using our trading skills.  Let’s discuss.

Trading is not just about finding levels and then taking positions for most intraday traders.  If it were that easy you would not be reading this blog.  Trading skills enable the intraday trader to determine when some levels will be violated and when some levels will hold.   We combine our tape reading skills, with our charting skills and our short term intraday fundamental analysis to determine which resistance levels will hold.  For example, on Friday we determined that the 17.80 RMBS level would hold.

1) There was more selling on the offer as RMBS neared 17.80.  2) There was a double intraday top at this level.   3) The longer term chart showed significant resistance.  4) The buyers were hesitant to pay as aggressively above 17.75.  5) The news was not so important as to cause a violation of this significant resistance level on a first test.   I lightened up with my intraday long position.  Steve got short and caught a 50c downmove.

Today we saw the strength from the tape in RMBS.  The pullback was shallow on Friday from the important resistance level.  RMBS was heading towards the 17.80 resistance level again.  The buying near this level today was aggressive.  After 17.80 held the bid, we got long.  When the bid held 85c, we got longer.  When the bid held above 90c, we got even longer.  RMBS traded up another point.  Chop!

We did not just rely on the charts to make decisions.  We watched the order flow, used some fundamental analysis to weigh the new news in RMBS from Friday, and read our charts.  Doing so allowed us to make chops on the short and long side trading RMBS on two seperate days.

When I write about reading the tape and learning how to trade this is exactly what I mean.  When I discuss developing trading skills to profit in any market these are the skills that are necessary.  Trading is not about making calls.  Trading is not just about reading charts.  Trading is about skill development such that you can trade a Stock in Play on either side.   Just check out the trading in RMBS the past two trading days.

Best of luck with your trading. Don’t forget to follow us on Twitter!.