This blog is going to go over one of my recent trades in COG. Yesterday’s morning session was very quiet and I was having difficulty finding stocks that were really moving. I was able to establish during the first 15 minutes or so that I would trade a ‘range strategy” until the market structure changed. (more about this on another blog, stay tuned) During these types of days I look to fade stocks having extended moves to resistance. I call this my ‘tape fade” trade.
To find my trades I first find a technical pattern I see and edge in and then find an entry using the tape. This setup’s success is pretty much given to the information I get from the tape, this is what makes this setup my highest probability trade in my playbook.
At 9:50 COG popped up on the SMB Radar and I put it on my screen, the stock was at 28.40. I noticed the stock was trading quickly to resistance so was looking for a spot to fade it. I then saw a 28.65 seller drop to 28.60, 28.55 was absorbing a ton on the bid. In this type of play I look to get short (fade the move) as soon as the buyer loses. It’s very likely that this will create a pullback in the stock or in the best case a reversal. I set my stop for this trade at the high of the move. Note that I am not picking tops, I am just following the big players in the stock and mechanically executing my setups. 28.65 ended up being the HOD, not bad for a trade with .10 of risk.
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2 Comments on “Finding good setups in a quiet tape”
It closed today at support from a few weeks ago. If it breaks I’d expect a significant drop-out considering the already established down-trend.
Very nice trade. Looking at this post/trade raises a bunch of questions in my mind bec fade trading can be very difficult for a developing trader like myself. It takes a lot practice. It’s more of an art form then scienticfic. I’m still learning how you distinguish between a reversal and just a pullback. I know reading the tape and repetition is crucial to develop the skills necessary to recognize patterns that offer the highest r/r. This comes with more screen time. I’ll get there.
Some questions that come to mind with this trade are:
-on the gap down, what was the catalyst? News? Earnings?
– where is your strong res mark when the gap fills? Is this a lt key infliction level or shot term (a few days, weeks).
-was there a held offer or did the bid just start to slowly drop?
-what was your target? At the pre-mrkt low or a different sup area on the chart?
-what was the overall market doing? The sector? Did these indicators actually have an effect on COG?
-if you were stopped out above 28.65, would you have changed your bias to the long side? Or was the move over-extended from the pre-mrkt low? What would be ur next targeted res if you did change your bias? Does this depend on what the overall market is doing?