Classic Geometric Patterns and Narrow Range Setups
- Thread starter inandlong
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An exciting day for the techies as a mid-day rally extends into the afternoon and pares losses considerably. Lol... sounds like a lead-in at your local fee-for-service website doesn't it? 
But who cares about that because we can only spend our profits. Let's take a look at how yesterday's list from SP100 fared. One note though - clearly the Nas was more volatile today... imagine that... so the list of candidates from the Nas100 would produce some interesting results I suspect.
Let's presume that entry is straightforward at .10 above or below the previous day's high or low, respectively. Reversal occurs at the opposite extreme plus or minus .10 as appropriate. Also, for the utmost simplicity, let's presume that the trade was MOC and we actually received the closing tick.
A point here however.... a valuable axiom is "don't let a winner turn into a loser." In other words, some of these stocks had small gains all day until the late mid-day rally. If the price comes back, especially later in the day, get out at scratch. There will be a lot of new candidates tomorrow and the cost of doing biz these days is neglible, so get out. Also, if a stock has made a nice move intra-day and then stalls, use some basic and sound TA like a trendline to capture most of that profit.
This is how I break down the action:
Symbol, Entry, Max Profit Potential (MPP), Reversal, Close, P/L
BA, S 49.78, .03, x, 50.20, -.42
BC - no entry but look at the chart pattern!
CSCO, S 22.08, .14, x, 22.29, -.21
JNJ, S 54.68, .17, x, 54.89, -.21
PG, L 55.00, .02, x, 54.88, -.12
SLB, S 62.01, .20, x, 62.39, -.38
TEK, S 31.45, .79, x, 31.35, +.10
XRX, S 13.48, .01, x, 13.62, -.14
MOC resulted in -1.38 not including slippage and commissions, spread over 7 trades. That's almost -.20 per trade, which in my book isn't bad for a losing day.
HOWEVER... ... what if we got out at scratch on the losers? I watched these all day, and they all afforded ample opportunity to get out at scratch. But let's say we got out at scratch minus .07. Also, TEK afforded an excellent opportunity to take nearly the maximum profit for a long time today, but let's just say we exited with .50. Again, there was plenty of time to make these decisions, and as I said before, since we are in a ranging market during the summer, let's be conservative.
Now we have 6 losers at -.07 per loss for -.42. We had one winner for .50. Now the P/L stands at .08 not including slippage and commissions. That's still nothing to write home about, but it is better than -1.38 on a directionless day.
For the record not posted here, easyguru's sample selections produced some very nice opportunities. I don't know easy's complete methodology, and if I did I wouldn't talk about it without his permission. But I will post a hint: look at his stocks using the line chart function, and read his post previous to this one.
I'll get another list up for tomorrow. Also, for those who are reading these posts, keep in mind that the original authors intend for these trades to be multi-day, and not daytrades. Keeping track of the symbols can become burdensome, but if you are trying to learn the dynamics of this method it is well worth it. One more thing, once you have looked at these enough, it is very easy to "backtest" charts simply by looking at them. The NRID days will stand out.
But who cares about that because we can only spend our profits. Let's take a look at how yesterday's list from SP100 fared. One note though - clearly the Nas was more volatile today... imagine that... so the list of candidates from the Nas100 would produce some interesting results I suspect.
Let's presume that entry is straightforward at .10 above or below the previous day's high or low, respectively. Reversal occurs at the opposite extreme plus or minus .10 as appropriate. Also, for the utmost simplicity, let's presume that the trade was MOC and we actually received the closing tick.
A point here however.... a valuable axiom is "don't let a winner turn into a loser." In other words, some of these stocks had small gains all day until the late mid-day rally. If the price comes back, especially later in the day, get out at scratch. There will be a lot of new candidates tomorrow and the cost of doing biz these days is neglible, so get out. Also, if a stock has made a nice move intra-day and then stalls, use some basic and sound TA like a trendline to capture most of that profit.
This is how I break down the action:
Symbol, Entry, Max Profit Potential (MPP), Reversal, Close, P/L
BA, S 49.78, .03, x, 50.20, -.42
BC - no entry but look at the chart pattern!
CSCO, S 22.08, .14, x, 22.29, -.21
JNJ, S 54.68, .17, x, 54.89, -.21
PG, L 55.00, .02, x, 54.88, -.12
SLB, S 62.01, .20, x, 62.39, -.38
TEK, S 31.45, .79, x, 31.35, +.10
XRX, S 13.48, .01, x, 13.62, -.14
MOC resulted in -1.38 not including slippage and commissions, spread over 7 trades. That's almost -.20 per trade, which in my book isn't bad for a losing day.
HOWEVER...
... what if we got out at scratch on the losers? I watched these all day, and they all afforded ample opportunity to get out at scratch. But let's say we got out at scratch minus .07. Also, TEK afforded an excellent opportunity to take nearly the maximum profit for a long time today, but let's just say we exited with .50. Again, there was plenty of time to make these decisions, and as I said before, since we are in a ranging market during the summer, let's be conservative.Now we have 6 losers at -.07 per loss for -.42. We had one winner for .50. Now the P/L stands at .08 not including slippage and commissions. That's still nothing to write home about, but it is better than -1.38 on a directionless day.
For the record not posted here, easyguru's sample selections produced some very nice opportunities. I don't know easy's complete methodology, and if I did I wouldn't talk about it without his permission. But I will post a hint: look at his stocks using the line chart function, and read his post previous to this one.
I'll get another list up for tomorrow. Also, for those who are reading these posts, keep in mind that the original authors intend for these trades to be multi-day, and not daytrades. Keeping track of the symbols can become burdensome, but if you are trying to learn the dynamics of this method it is well worth it. One more thing, once you have looked at these enough, it is very easy to "backtest" charts simply by looking at them. The NRID days will stand out.
I trade a small portion of my account with this now days. As my account size has increased I am slowly trading less and less of this as size becomes a constrain for this method.
As to my selection I use a relative strength filter for selecting candidates. Also as Inandlong has noted most of them are part of a larger pattern like approaching multi year high, consolidation after breaking to all time high or breakdown after runaway move. In many cases I already have longer term positions in them and I look for a low risk entry to add to the position.
Sorry for the delay in posting the listed candidates for today. I ran the screen on the SP500 to give us a larger selection. Here is the complete list. A note - BGG is spanking us right now, but otherwise there are / have been some excellent profit opportunities... and no whipsaws so far. Also, not all stocks have triggered an entry so although the list is 24 stocks long - not all are in play. And one more thing - no other filter criteria have been applied, like minimum volume requirements, or min/max stock price, etc.
AET, AHC, AEP, BHI, BOL, BGG, CTX, CTB, DLX, FCX, GPS, IFF, KRB, PMTC, PNU, RML, R, SVU, SYY, TWX, TKR, UNH, VFC, WMB.
Consider the entry to be 10 cents above or below the previous day's extreme.
Also, not all stocks have triggered an entry so although the list is 24 stocks long - not all are in play. And one more thing - no other filter criteria have been applied, like minimum volume requirements, or min/max stock price, etc.AET, AHC, AEP, BHI, BOL, BGG, CTX, CTB, DLX, FCX, GPS, IFF, KRB, PMTC, PNU, RML, R, SVU, SYY, TWX, TKR, UNH, VFC, WMB.
Consider the entry to be 10 cents above or below the previous day's extreme.
The SP500 finished up less than a point overall so it is fair to say it was another fairly directionless day, ie., no supertrend activity.
I am not going to post the results of the list from today; however I did look at each one and it looks to me like today was a nice winning day. I think BGG was the only real stinker. It had a good size loss, but also had a decent win, and an even better long profit potential to ameliorate the earlier loss.
One means of filtering potential candidates is rejecting those whose end-to-end reversal numbers are wider than your tolerance, Typically that means rejecting the candidates that are higher priced, which in today's trade would have negated some profit also, ie., AET.
Anyway, a good day overall, I think. Today was a short day for me as I took the kids to the pool at noon and didn't come home until dinner. I haven't looked at easy's candidates for today, but I'm sure it will be very interesting.
Edit: I just took a look at easyguru's selections using the .10 entry criteria and the results are very interesting and well worth a look.
I will get tomorrow's candidates up later tonite.
I am not going to post the results of the list from today; however I did look at each one and it looks to me like today was a nice winning day. I think BGG was the only real stinker. It had a good size loss, but also had a decent win, and an even better long profit potential to ameliorate the earlier loss.
One means of filtering potential candidates is rejecting those whose end-to-end reversal numbers are wider than your tolerance, Typically that means rejecting the candidates that are higher priced, which in today's trade would have negated some profit also, ie., AET.
Anyway, a good day overall, I think. Today was a short day for me as I took the kids to the pool at noon and didn't come home until dinner. I haven't looked at easy's candidates for today, but I'm sure it will be very interesting.
Edit: I just took a look at easyguru's selections using the .10 entry criteria and the results are very interesting and well worth a look.
I will get tomorrow's candidates up later tonite.
I'll put the list of SP500 candidates up in the morning. For those tuning in to this thread at this post the posted symbols represent NRID4's.
Here is the list of Nas100 candidates for Weds. I thought it might be interesting to see if anything good happens following the INTC report.
CHIR, DELL, ERCY, MSFT, NXTL.
There were three other stocks, all below $10.
Of those stocks, CHIR and NXTL have ATR14's of .91 and .90 respectively. That's not a lot of range by any means. A point that I think is relevant but empirically observed - beware of the proximity of major moving averages. Buying into a break that is occurring just below a popularly followed major MA might not be a good idea. At least keep it in mind and take note of how it plays out over time.
Here is a daily chart of MSFT. I have drawn a descending triangle, which is classically a continuation pattern. Classically it should break down 50-67% of the way thru the pattern, which makes tomorrow the day. As oddi' said, a break accompanied with a good volume surge is meaningful.
Here is the list of Nas100 candidates for Weds. I thought it might be interesting to see if anything good happens following the INTC report.
CHIR, DELL, ERCY, MSFT, NXTL.
There were three other stocks, all below $10.
Of those stocks, CHIR and NXTL have ATR14's of .91 and .90 respectively. That's not a lot of range by any means. A point that I think is relevant but empirically observed - beware of the proximity of major moving averages. Buying into a break that is occurring just below a popularly followed major MA might not be a good idea. At least keep it in mind and take note of how it plays out over time.
Here is a daily chart of MSFT. I have drawn a descending triangle, which is classically a continuation pattern. Classically it should break down 50-67% of the way thru the pattern, which makes tomorrow the day. As oddi' said, a break accompanied with a good volume surge is meaningful.