I have never written a blog post about the trade setup that I’m about to discuss. For the most part we share pretty openly the setups and techniques we use on a daily basis to make money. I’ve been contacted by many developing traders who actually can’t believe the amount of information we provide free of charge via our blog.
There are a few setups that I have been reluctant to discuss for fear that somehow the trades would become more crowded and impact my ability to make money. Most likely that fear is unwarranted as trading is about finding setups that work for you and figuring out how to best trade them. Even if I were to discuss the following trade setup during our AM Meeting 80%+ of our desk would not make the trade because either it is not part of their playbook or they would be focused on a different stock when the setup triggered.
The trade is a fade trade based on a breakout on heavy volume during the prior trading day. On the second day the stock opens higher than the prior day’s breakout price. You buy the stock when it drops to the breakout price. You are relying on the fact that those who paid on the prior day’s breakout are willing to defend the stock at that price, and those who missed the initial breakout may initiate a position at that price as well.
The example from today was FSLR. Yesterday it popped on big volume from 110. This morning when it pulled back there it was bought. There was a huge surge in volume and it traded up four points in 15 minutes. Depending on the time of day and what the box looks like when it hits your entry price will help you to determine how much size to have for the play. But this is a trade I am willing to make 100% of the time. The risk to reward is generally greater than 1:10.
14 Comments on “A New Arrow For Your Quiver”
interesting play. do you think buying 113.00 in FSLR would tomorrow offer the same R/R?
i feel like AMZN did the same thing today when it retested 131.00 around 9:55? thank you for elucidating these trades2hold. seems like these technical levels are too important to not trade, regardless of the tape because of their high probability?
interesting play. do you think buying 113.00 in FSLR would tomorrow offer the same R/R?
i feel like AMZN did the same thing today when it retested 131.00 around 9:55? thank you for elucidating these trades2hold. seems like these technical levels are too important to not trade, regardless of the tape because of their high probability?
The level of resistance becomes a level of support. Am I right? It is important that a breakthrough was on a round figure?
The level of resistance becomes a level of support. Am I right? It is important that a breakthrough was on a round figure?
Yes, indeed you are offering valuable information here and on stocktwits and a lot of patterns that have a great risk:reward. But the key question is how you add, load and unload size? I think here is a minus for the ‘free’ information. Bella tackled this subject and offered some explanations, but still… this is like the cherry on the cake.
Yes, indeed you are offering valuable information here and on stocktwits and a lot of patterns that have a great risk:reward. But the key question is how you add, load and unload size? I think here is a minus for the ‘free’ information. Bella tackled this subject and offered some explanations, but still… this is like the cherry on the cake.
OC- like Bella said, I think you need to trade a style/play that works for you. You should take this IDEA and make it work for you. You are at a disadvantage if you need to rely on someone else to tell you the answers to the questions you seek (add size, exit, etc). just my thoughts…..
OC- like Bella said, I think you need to trade a style/play that works for you. You should take this IDEA and make it work for you. You are at a disadvantage if you need to rely on someone else to tell you the answers to the questions you seek (add size, exit, etc). just my thoughts…..
meant what Steve said
meant what Steve said
@gary243
Far away from me the thought of someone telling me exactly how to add size or were to exit, this is the last thing I am expecting. But managing a position is a function of the pattern. For example in the pattern that Steve described maybe he has a particular style for managing the position attached to it, like: ‘bid for x shares on the way down from 5 to 5 cents until the support, with a risk of n%, and if the stock starts to show strenght and clears a resistance then add 2/3’ I don’t know..I’m just saying, but I want to point that a simple technical pattern helps a lot – it’s necessary – but not enough to ensure your success.
@gary243
Far away from me the thought of someone telling me exactly how to add size or were to exit, this is the last thing I am expecting. But managing a position is a function of the pattern. For example in the pattern that Steve described maybe he has a particular style for managing the position attached to it, like: ‘bid for x shares on the way down from 5 to 5 cents until the support, with a risk of n%, and if the stock starts to show strenght and clears a resistance then add 2/3’ I don’t know..I’m just saying, but I want to point that a simple technical pattern helps a lot – it’s necessary – but not enough to ensure your success.
I have been using this setup for a few months and must agree that it has been working great. I appreciate what you guys have been doing via stocktwits, your blog, and twitter its has made me a better trader. -Jay
I have been using this setup for a few months and must agree that it has been working great. I appreciate what you guys have been doing via stocktwits, your blog, and twitter its has made me a better trader. -Jay