Trading Gaps and Breakouts (Stocks)
- Thread starter Brandonf
- Start date
nice moves today in:
DRYR
BBOX
FITB
for gap/breakout type plays..
relying more heavily on gaps and breakouts in current market since many core trading stocks in typical software/semi/biotech sectors have had "quiet days" .. so scanning becomes more important, to catch these unfamiliar, but volatile, stocks on open range breakouts and gaps..
ken
DRYR
BBOX
FITB
for gap/breakout type plays..
relying more heavily on gaps and breakouts in current market since many core trading stocks in typical software/semi/biotech sectors have had "quiet days" .. so scanning becomes more important, to catch these unfamiliar, but volatile, stocks on open range breakouts and gaps..
ken
As a general rule we are able to cash in on 1 to 3 of these large trend days per month, and today was definatly one of those.
Chart: http://www.tradingfrommainstreet.com/trades/March13ES1.gif
Our first trade of the day was a long in the Emini S&P500 right out of the gate. Convential wisdom holds that "all gaps fill" but I know from exhaustive research that the larger the gap in an index, the more likely it is to continue in the direction of that gap. In fact, the top tier of gaps never fill on the day they occur. Today we had a very large gap that set off many traps on the daily charts. This puts a lot of traders in a painful situation, but gives us the opportunity to profit by trading with our plan. In the premarket the ES formed a fairly nice bullflag. When the market opened we had the momentum shift back up in the flag and got long for a nice gain.
Chart: http://www.tradingfrommainstreet.com/trades/March13NQ1.gif
This is a chart of our trade in the Emini Nasdaq that occured right after the 10am retail sales numbers came out. The numbers came in worse than expected. Given this the market "should" have sold off, however it did not. One of the cardinal rules for traders is "that which should go down, should go down. If it does not it will do the opposite". After the number the market sold off very little and came to the 200 period moving average support. We bought right on the moving average and got a nice gain out of the index.
Chart: http://www.tradingfrommainstreet.com/trades/March13WY.gif
This was the first stock trade of the day, which was in WY. The stock gapped up nicely at the open and held its gap for the first several minutes of the day. When it broke the base that triggered our buy setup.
Chart: http://www.tradingfrommainstreet.com/trades/March13ROK.gif
This is a chart of the buy setup in ROK. The chart is picture perfect and speaks for itself!
Chart: http://www.tradingfrommainstreet.com/trades/NQ2.gif
This is a chart of my second buy in the Emini Nasdaq 100. I am using the chart of the QQQ here simply because it shows the setup very clearly. Our large opening gap put us above the upper Keltner banner right on the open. This signals that we have a strong move which is likely to continue back up after a retracment. When the index retraced to the 20 period moving average that set off our buy. Another very nice profit.
Chart: http://www.tradingfrommainstreet.com/trades/Nas2minflag.gif
Here is a chart of the long we had in the Emini Nasdaq 100 going into the close. Volume was very good today, the TICKs stayed positive and uptrending for the most part, and the TRIN was very low. We had a nice uptrend going and this suggests that there would be good buying interest into the close. So given this I was watching for a setup to occur. We got a nice 2 minute bullflag which then provided us with an entry for the long into the close.
Chart: http://www.tradingfrommainstreet.com/trades/March13CDWC.gif
Another perfect example of a breakout chart.
Chart: http://www.tradingfrommainstreet.com/trades/March13BBBY.gif
Another very nice breakout chart. I got impatient though and sold the stock at breakeven when it did not move right away. I watched this one from the stands as it turned into a nice trade without me.
Chart: http://www.tradingfrommainstreet.com/trades/NQshort.gif
Going into the noon hour the market has a tendancy to retrace its morning move. Given this, the double top and that the NYSE TICK indicator was not confirming the move to new highs we took a short in the Nasdaq in the circled area. Because we had the traps in place and the trends were all very strong I felt the trade was higher risk so it was traded with half lots. We lost 1.5 to 2.5 points on this one.
Brandon
Chart: http://www.tradingfrommainstreet.com/trades/March13ES1.gif
Our first trade of the day was a long in the Emini S&P500 right out of the gate. Convential wisdom holds that "all gaps fill" but I know from exhaustive research that the larger the gap in an index, the more likely it is to continue in the direction of that gap. In fact, the top tier of gaps never fill on the day they occur. Today we had a very large gap that set off many traps on the daily charts. This puts a lot of traders in a painful situation, but gives us the opportunity to profit by trading with our plan. In the premarket the ES formed a fairly nice bullflag. When the market opened we had the momentum shift back up in the flag and got long for a nice gain.
Chart: http://www.tradingfrommainstreet.com/trades/March13NQ1.gif
This is a chart of our trade in the Emini Nasdaq that occured right after the 10am retail sales numbers came out. The numbers came in worse than expected. Given this the market "should" have sold off, however it did not. One of the cardinal rules for traders is "that which should go down, should go down. If it does not it will do the opposite". After the number the market sold off very little and came to the 200 period moving average support. We bought right on the moving average and got a nice gain out of the index.
Chart: http://www.tradingfrommainstreet.com/trades/March13WY.gif
This was the first stock trade of the day, which was in WY. The stock gapped up nicely at the open and held its gap for the first several minutes of the day. When it broke the base that triggered our buy setup.
Chart: http://www.tradingfrommainstreet.com/trades/March13ROK.gif
This is a chart of the buy setup in ROK. The chart is picture perfect and speaks for itself!
Chart: http://www.tradingfrommainstreet.com/trades/NQ2.gif
This is a chart of my second buy in the Emini Nasdaq 100. I am using the chart of the QQQ here simply because it shows the setup very clearly. Our large opening gap put us above the upper Keltner banner right on the open. This signals that we have a strong move which is likely to continue back up after a retracment. When the index retraced to the 20 period moving average that set off our buy. Another very nice profit.
Chart: http://www.tradingfrommainstreet.com/trades/Nas2minflag.gif
Here is a chart of the long we had in the Emini Nasdaq 100 going into the close. Volume was very good today, the TICKs stayed positive and uptrending for the most part, and the TRIN was very low. We had a nice uptrend going and this suggests that there would be good buying interest into the close. So given this I was watching for a setup to occur. We got a nice 2 minute bullflag which then provided us with an entry for the long into the close.
Chart: http://www.tradingfrommainstreet.com/trades/March13CDWC.gif
Another perfect example of a breakout chart.
Chart: http://www.tradingfrommainstreet.com/trades/March13BBBY.gif
Another very nice breakout chart. I got impatient though and sold the stock at breakeven when it did not move right away. I watched this one from the stands as it turned into a nice trade without me.
Chart: http://www.tradingfrommainstreet.com/trades/NQshort.gif
Going into the noon hour the market has a tendancy to retrace its morning move. Given this, the double top and that the NYSE TICK indicator was not confirming the move to new highs we took a short in the Nasdaq in the circled area. Because we had the traps in place and the trends were all very strong I felt the trade was higher risk so it was traded with half lots. We lost 1.5 to 2.5 points on this one.
Brandon
Yesterday was the best day of the year for many people following us as we capitalized very well on the range expansion. At the open all systems where go and we pressed our edge. It was the widest range day of the year in the Nasdaq which brings up some particular issues the next day. While we did extremely well yesterday and cashed in, most traders missed the move, either shorting or wondering "Why is this move happening" and watching the entire thing take place. Coming into today they are determined to make up what they did not get yesterday. This is the crowd that is often confused and rarely has a plan. The day following a huge trend day such as yesterday is often characterized by very sloppy, choppy action as the market does its best to again separate the ill prepared from their money when they are the most likely to give it up.
I did some research on my own trading the day after a WR7 (Widest Range of the last 7) and found that like most people, my results are not all that great. I am fortunate however that in most cases I capitalized well on the WR7, which can not be said for most people. This does put me in a unique situation though. While most people are trying to make up for lost opportunity on a day like today, I have no such concern. My primary concern is just to keep (most of what) I made the prior day. How do I do this? Well knowing that the action is likely to be fairly chaotic and not favorable to me I could simply take the day off. This is a legitimate option and not one to be ignored. However, while the majority of days following WR7s are down days for me, on net I have still be (very slightly) profitable. The action is not though much to my liking. So my solution is simply to trade very small. Because having too much of a loss after having had a nice day can be an emotional wreck, and the day following the wide range is most likely to be negative for me, I trade with very small size. Less then half of my normal position size. I also try to limit my trading to a very small number with this small size. This allows me to still have the potential of gain that the day might offer, while at the same time greatly reduces my chances of suffering a meaningful loss.
I did some research on my own trading the day after a WR7 (Widest Range of the last 7) and found that like most people, my results are not all that great. I am fortunate however that in most cases I capitalized well on the WR7, which can not be said for most people. This does put me in a unique situation though. While most people are trying to make up for lost opportunity on a day like today, I have no such concern. My primary concern is just to keep (most of what) I made the prior day. How do I do this? Well knowing that the action is likely to be fairly chaotic and not favorable to me I could simply take the day off. This is a legitimate option and not one to be ignored. However, while the majority of days following WR7s are down days for me, on net I have still be (very slightly) profitable. The action is not though much to my liking. So my solution is simply to trade very small. Because having too much of a loss after having had a nice day can be an emotional wreck, and the day following the wide range is most likely to be negative for me, I trade with very small size. Less then half of my normal position size. I also try to limit my trading to a very small number with this small size. This allows me to still have the potential of gain that the day might offer, while at the same time greatly reduces my chances of suffering a meaningful loss.
Small and average sized gaps have a tendancy to fill on the day they occur. Most large gaps though will not fill on the day they occur, and those that can hold up in the first few minutes of the day stand a good chance of moving higher. The large gap in HGSI this morning brought my attention to the stock. It held up and when it took out a prior high I had a long scalp in the trade. We managed to take 15 to 20 cents from this, not much but nothing to complain about either.
Brandon
I prefer a stock gapper that looks like this ...unfortunately i did not capitalize on this move at all as i was too busy playing a dog.
many large up-gapping stocks on significant news have a followthrough at the open for at least .30
At least that is what I have observed thus far.
The chart is from march 17
this gap and up move is massive which set the stage for interesting action the next day where I made some money.
...unfortunately i did not capitalize on this move at all as i was too busy playing a dog.many large up-gapping stocks on significant news have a followthrough at the open for at least .30
At least that is what I have observed thus far.
The chart is from march 17
this gap and up move is massive which set the stage for interesting action the next day where I made some money.
And here is yesterday's trade. it only relates to the gap play mode insofar as the day before's chart was a gap and that tends to influence the action the next day.
I believe there is a develop-able method for after gap days.
and of course it could have been that i was just lucky, but believing in luck only will not teach anyone anything.
I believe there is a develop-able method for after gap days.
and of course it could have been that i was just lucky, but believing in luck only will not teach anyone anything.
