I would like to share with you another little gem from the world of intraday trading.  If a stock shows support at a particular level in the afternoon then the following morning this level will serve as resistance if the stock has gapped down.  In our AM Meeting today I highlighted some of the market leaders such as AAPL and GS.  The most important level I discussed in GS was Friday afternoon’s support of 148.70.  This was also a key level on Friday morning as well as Thursday afternoon.

As an intraday trader I am always searching for prices that served as support or resistance in the recent past.  I set price alerts at these levels for potential trades.  Then I use my tape reading skills to decide whether or not to establish positions at these prices.  For example, if I know that 148.70 has been a key level the past couple of trading days in GS I will watch the Box and the prints when GS gets to this price.  If a bid is unable to hold above this key level then I will enter a short position.  If I notice significant selling at this level then I will add to my position.  By combining my technical analysis knowledge with my tape reading skills I am able to establish positions with incredibly favorable risk to reward ratios.

I was watching AAPL and GS like a hawk on the Open.  I was looking to see if the price action would confirm the weakness I had seen in the market on Friday.  GS gapped down nicely on the Open, which was further confirmation of its weakness from the prior trading day.  About an hour later it traded up to the 148.70 level.  I shorted a small position.  After it dropped below the 148.70 level I shorted some more.  My trading plan was to cover my second lot if the 148.70 offer lifted (which it never did) and cover my first lot if a bid held above 149.  During the next 10 minutes GS traded down about one point and I covered my short.  I made sure to set a price alert again for the  148.70 level.  The price alert came in handy about 15 minutes later when GS traded up to 148.79.  It looked awful on the Box as it couldn’t even hold a bid above 148.65.  I reestablished a short position and actually caught a larger down move the second time.

I hope to find one this good tomorrow 🙂 . Don’t forget to follow us on Twitter!.