Today started off a bit rocky with my first two trades producing stops. Since I spent the entire day yesterday traveling between New York and Iowa I figured I would take a few hours off and get some more rest and come back. That seems to have done the trick as the last three trades of the day produced gains that more then made up for the losses of the morning.
First Trade. Short Nasdaq 1014.5 with stops above 1018.
Chart:
http://www.tradingfrommainstreet.com/img/Nas1March3.gif
You can see in the daily chart of the Nasdaq that we gapped up just barely above yesterdays highs. With the most recent choppy action you can pretty much bet that if one day is up the next day will be down. Combine that with the fact that we gapped up to resistance and that average sized gaps have a 71% chance of being filled in on the NSD made me feel pretty comfortable with this trade. Unfortunately I took the setup just 2 points above the GLOBEX lows, so when those where tested it provided enough support to cause a bounce that stopped us out.
Second Trade. Short SBUX $23.45 with stop taken $23.47.
Chart:
http://www.tradingfrommainstreet.com/img/March3Sbux.gif
The first stock of the day was Starbux short. This provides a pretty good example of finding a trade in a larger timeframe and then going to a smaller one to work your entry. In the daily timeframe we see both a 2b (
http://www.tradingfrommainstreet.com/chartpatterns/all.asp#2b) and an Oops short set up (
http://www.tradingscans.com/education/oops1.htm) . This gave us two very good reasons to look for a shorting opportunity in SBUX ,so now I moved down to my micro timeframes to get an entry. This is done so that I am risking a very small amount (the risk found in the 1 minute timeframe in this case) yet I am working with the potential of the larger (Daily) timeframe. This allows us to get very favorable risk to reward ratios with large potential gains, and very small stops when they happen as you can see by the fact that we only lost 2 to 8 cents (executions factored in) on this trade.
Third Trade. Short EBAY from $78.50. Profits taken $78.10.
Chart:
http://www.tradingfrommainstreet.com/img/EbayMarch3.gif
EBAY Provided a setup almost exactly the same as we had with SBUX, the only difference being the timeframe that I took my entry in. The daily chart had a 2b, failed 20 day high and an Ooops short. Once this is found I then look in the smaller timeframes to find my entry. This was found on the 15 minute chart as it formed an avalanche reversal pattern (
http://www.tradingfrommainstreet.com/chartpatterns/all.asp#avalanche) The profit target came from the area of the last pivot low, which you can see on Friday. This trade also clearly shows the benefits of trading in multiple timeframes with small risk and a decent profit taken on the trade.
Fourth Trade. Short FAST from $32.35. Profits taken $32.08.
Chart:
http://www.tradingfrommainstreet.com/img/March3Fast.gif
This is a very simple core setup. As you can see on this five minute chart FAST is in a pretty well established downtrend. That being the case I like to look for continuation patterns such as bear flags (
http://www.tradingfrommainstreet.com/chartpatterns/all.asp#bearflag) After a steep decline FAST began to rally up to its 20ema and provided us with a nice shorting opportunity.
Fifth Trade. Short NQ from 1004.5. Profits taken 1001 and 998. Average 999.5
Chart:
http://www.tradingfrommainstreet.com/img/Emini2March3.gif
Here are the five minute line charts of each of the three major indexes. I like to use the line charts because they give a very clear indication of the trend and you can see relative strength between the indexes very well. In the circled area you can see that the DOW and the SP500 both had rallied, but the Nasdaq did not rally in any real way at all. Instead of going up, it continued to base showing relative weakness versus the other indexes. During this period it formed a very nice bear flag which we took advantage of. The relative weakness in the Nasdaq vs. the other indexes told me that it would be the lower risk one of the group, and have the most potential for gain.
Brandon
