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Trade #4: This setup was similar to the heating oil trade although the stock does not appear to have anything to do with heating oil. My reasons for taking this trade are because the stock is in a longer term downtrend and has recently pulled back to the 40 day EMA. The first leg up to the EMA was too sharp for me to short. The second leg up set up a potential double top. The double top is highlighted in by the significant tails on candles from two of the last three weeks. In addition, the double top is just below a trading range that started in mid-November of last year and ended in early January of this year. This should act as resistance. I am only risking a little over 1% of my portfolio on this trade. I placed orders to go short on several stocks this morning but this is the only one that triggered. The reason it triggered was because I used a sell limit order instead of my usual sell stop order to enter this stock. I did this because I prefer to enter short right below the top bar in a pullback and Friday’s bear bar had already traded below the top bar. In hindsight, I’m not so sure that was a good idea given the bullishness of the overall market. Plus I don’t like the fact that a small bull inside bar formed today sitting right on top of the 40 day EMA. Given my #1 psychological issue seems to be exiting trades shortly after I enter them just because the setup doesn’t look as appealing as it first did, I will hold onto and manage this trade until more solid evidence surfaces that it will likely fail.

Instrument: STX (US Stock)
Timeframe: Daily
Setup: Pullback
Entry Price: $31.98
Initial Stop Price: $33.66
Trade Type: Scalp
Initial Target: $24.89
 
2_bits said:
Trade #4: This setup was similar to the heating oil trade although the stock does not appear to have anything to do with heating oil. My reasons for taking this trade are because the stock is in a longer term downtrend and has recently pulled back to the 40 day EMA. The first leg up to the EMA was too sharp for me to short. The second leg up set up a potential double top. The double top is highlighted in by the significant tails on candles from two of the last three weeks. In addition, the double top is just below a trading range that started in mid-November of last year and ended in early January of this year. This should act as resistance. I am only risking a little over 1% of my portfolio on this trade. I placed orders to go short on several stocks this morning but this is the only one that triggered. The reason it triggered was because I used a sell limit order instead of my usual sell stop order to enter this stock. I did this because I prefer to enter short right below the top bar in a pullback and Friday’s bear bar had already traded below the top bar. In hindsight, I’m not so sure that was a good idea given the bullishness of the overall market. Plus I don’t like the fact that a small bull inside bar formed today sitting right on top of the 40 day EMA. Given my #1 psychological issue seems to be exiting trades shortly after I enter them just because the setup doesn’t look as appealing as it first did, I will hold onto and manage this trade until more solid evidence surfaces that it will likely fail.

Instrument: STX (US Stock)
Timeframe: Daily
Setup: Pullback
Entry Price: $31.98
Initial Stop Price: $33.66
Trade Type: Scalp
Initial Target: $24.89
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like this trade better. If you flipped chart it would look like a pullback in an uptrend. Obviously not fun to see it go against. R/R is good.
 
Trade #5: My reasons for taking this trade are because the instrument has been in downtrend since July of last year and it appears that the downtrend will continue for a little while longer. Earlier this month the instrument formed a near perfect 40 period EMA setup on the daily time frame then and subsequently sold off. This setup formed a trading range that should now act as resistance for the small pullback from the selloff. This small pullback has lasted for seven bars and they have been very weak. Today a decent reversal candlestick formed indicating that price will continue downward. Because the longer term trend is up on the monthly chart and we are very close the 40 month EMA, am only trading this setup as a scalp with a fixed target. I am risking 2% of my portfolio on this trade.


Instrument: May 2016 SM

Timeframe: Daily
Setup: Pullback
Entry Price: $265.43 (average)
Initial Stop Price: $269.8
Trade Type: Scalp
Target: $253
 
Cswim63 said:
like this trade better. If you flipped chart it would look like a pullback in an uptrend. Obviously not fun to see it go against. R/R is good.
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Thanks. Trying to stick with pullbacks in trends for now while I continue my studies and backtesting. These types of trades feel more intuitive. I appreciate your comments and suggestions Cswim.
 
STX, looks like a nice stock to get dividends on paying over 7%.
Yea, one of those stocks where has double bottom on lows and then another double bottom above the gap. I be a buyer on breakout of Ascending Triangle.

Sorry if I am going against your thoughts.
 
Handle123 said:
STX, looks like a nice stock to get dividends on paying over 7%.
Yea, one of those stocks where has double bottom on lows and then another double bottom above the gap. I be a buyer on breakout of Ascending Triangle.

Sorry if I am going against your thoughts.
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Not a problem. One of the reasons I'm here is to to hear opinions other than my own. I see that this is a fairly high dividend stock. I didn't really consider that when choosing the trade. Fortunately the ex-dividend date was earlier this month.

I see the double bottoms you mentioned. My instincts are not putting much significance on them but I will explore the pattern more closely. Regarding the ascending triangle, is this something you are anticipating or already see? I could see one forming after some more sideways price action with the 2/4 and 2/18 tops forming the first two of the three pushes up. If that happens I will definitely reconsider the trade - don't want to get caught short at the top of an ascending triangle as it breaks out to the upside!
 
Ascending Triangles breakouts usually in my backtesting has fairly high profitable moves, so it is one pattern I am always scanning, but the two groups of double bottoms is start of stair stepping in one direction, of course if stock gets you into a short, could be to close the Gap which is a signal for me to go other direction, risk then is very tight and reward much higher.
 
2_bits said:
Thanks. Trying to stick with pullbacks in trends for now while I continue my studies and backtesting. These types of trades feel more intuitive. I appreciate your comments and suggestions Cswim.
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When I think of shorts, I'm looking, generally for the weakest stock in the weakest industries, and the opposite for longs. The best shorts are bankruptcy candidates, the best longs you should not have to sell for years they are so strong. That's the ideal picture, then you trade around that. You can look at any particular industry the same way--there's dogs and angels. Sometimes the dogs win, but usually not over time. You are putting a team together, you want the best players. And trade mediocrity away.
 
2_bits said:
Thanks Handle! I rolled it over this morning to the April contract using a calendar spread that my broker provides. Here's the updated prices based on the April contract.

Trade #3: Update based on roll from March to April contract.

Instrument: April 2016 HO
Timeframe: Daily
Setup: Pullback
Entry Price: ~$1.0825
Initial Stop Price: $1.1287
Trade Type: Swing
Initial Target: $0.8740
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Just an quick update on trade #3. I moved the trailing stop loss above yesterday's high to bring my initial risk exposure down to about 25% of what it originally was. If stopped out, I may look to reenter if there is bearish evidence, but right now there are too many tightly overlapping bull and bear bars for me to feel very comfortable holding onto the position.
 
marketsurfer said:
Welcome to elitetrader! When the student is ready, the teacher will appear.

There is tons of good information here. Just take your time and think for yourself. Good luck!
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For every ton of good, there's 10 tons of bad. As in the Indiana Jones movie, the last crusade. Pick wisely, and drink from the right cup.
 
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