Would Appeciate Some Feedback From Experienced Traders...

M

mgregor

Hello,

I'm relatively new to trading NASDAQ stocks. I used to scalp NYSE/AMEX stocks until decimalization rendered my strategy useless.

I've been studying Tony Oz's book, "The Stock Trader". I used BigEasy Investor to compile my constant watch list with the following criteria:

Average Volume 6 months: greater than 2,000,000
Closing Price: Greater than $50
Daily Range Average: Greater than $4
Exchange: Equal to NASDAQ

This generated the following 7 stocks:

CHKP, CIEN, CMVT, JNPR, NVDA, QCOM and VRTS

My purpose in posting this is to get some criticism on my thinking from you more experienced traders, especially those who follow Tony Oz's methods of Support/Resistance. If my thinking or approach is wrong in any way, please let me know. Do you guys agree with my technical analysis on these stocks?

Zboy, I would especially like to hear your opinion, as you have studied with Tony before and are familiar with his system.


CHKP

Daily Chart (300 days):

Chart Formations: No significant formations.

Major Resistance: Around 113, the highs on 12/11/00 and 1/30/01.
Major Support: Support of 66.67 was violated on 11/29/00. Next major support level at 51.71, the high on 2/4/00.

Intra-day Chart (5 min, 14 days):

Chart Formations: Appears to be trading in a channel between 64 and 72, from 3/6/01 to 3/9/01.

Major Resistance: Around 72, the highs on 3/1/01 and 3/7/01.
Major Support: Around 64, the lows on 3/6/01 and 3/9/01.

Trading Plan: Buy at or near (within ½ point) of intra-day support level of 64, or sell at or near resistance level of 72.

CIEN

Daily Chart (300 days):

Chart Formations: Appears to be making a double bottom, with the first bottom at 59 9/16 on 12/21/00.

Major Resistance: Around 121, the highs on 10/25/00 and 12/12/00.
Major Support: Around 59 9/16, the bottom made on 12/21/00.

Intra-day Chart (5 min, 14 days):

Chart Formations: Appears to be trading in a channel between 63 ½ and 78, from 2/26/01 to 3/9/01.

Major Resistance: Around 78, the highs on 2/26/01 and 3/7/01.
Major Support: Around 63 ½, the lows on 3/1/01 and 3/9/01.

Trading Plan: Buy at or near (within ½ point) of intra-day support level of 63 ½, or sell at or near resistance level of 78.

CMVT

Daily Chart (300 days):

Chart Formations: No significant formations.

Major Resistance: Around 123 7/8 to 124 3/4 the highs on 3/7/00 and 1/24/01.
Major Support: Around 71, the low on 2/28/01.

Intra-day Chart (5 min, 22 days):

Chart Formations: No significant formations.

Major Resistance: Around 87 ¼, the high on 3/7/01.
Major Support: Around 71 to 72 ½, the lows on 2/28/01 and 3/5/01, respectively.

Trading Plan: Buy at or near intra-day support levels of 71 to 72 ½, or sell at or near resistance level of 87 ¼.

JNPR

Daily Chart (300 days):

Chart Formations: Appears to have made a head and shoulders top formation, with the top at 244 ½, the high on 10/16/00. This pattern was confirmed on 2/9/01, with the downside break of 89 5/8 (right shoulder low on 12/21/00).

Major Resistance: Around 144 ½ to 145, the highs on 12/29/00 and 1/17/01, respectively.
Major Support: Around 48 9/16, highs on 11/8/99 and 11/9/99 and low on 12/20/99.

Intra-day Chart (5 min, 22 days):

Chart Formations: No significant formations.

Major Resistance: Around 64 1/8, the high on 3/8/01.
Major Support: Around 53 ¼, the low on 3/2/01.

Trading Plan: Buy at or near intra-day support level of 53 ¼, or sell at or near resistance level of 64 1/8.

NVDA

Daily Chart (300 days):

Chart Formations: No significant formations.

Major Resistance: Around 61, the high on 2/16/01.
Major Support: Around 27 ½, the low on 12/21/00.

Intra-day Chart (5 min, 22 days):

Chart Formations: No significant formations.

Major Resistance: Around 54 7/16, the approximate highs on 2/26/01 and 3/8/01.
Major Support: Around 45 3/8, the lows on 3/6/01 and 3/9/01.

Trading Plan: Buy at or near intra-day support levels of 45 3/8, or sell at or near resistance levels of 54 7/16.

QCOM

Daily Chart (300 days):

Chart Formations: Appears to be in the midst of forming a cup with handle pattern.

Major Resistance: Around 89 3/8, the high on 2/8/01.
Major Support: Around 50, the highs on 8/26/99 and the lows on 2/23/01.

Intra-day Chart (5 min, 22 days):

Chart Formations: No significant formations.

Major Resistance: Around 59, the approximate high on 3/8/01
Major Support: Around 50 1/8, the lows on 2/23/01.

Trading Plan: Buy at or near intra-day support levels of 50 1/8, or sell at or near resistance levels of 59.

VRTS

Daily Chart (300 days):

Chart Formations: No significant formations.

Major Resistance: No clear resistance level is visible on the daily chart. I feel this chart is very messy, with no clear indication of support/resistance levels.
Major Support: Around 55, the low on 2/22/01. Due to the parabolic growth of this stock last year, there are few pivot points that I see as valid support levels.

Intra-day Chart (5 min, 22 days):

Chart Formations: No significant formations.

Major Resistance: Around 67 ¾, area where the stock had trouble getting higher on 3/6/01 and 3/7/01.
Major Support: Around 56 5/16, the low on 3/5/01.

Trading Plan: Buy at or near intra-day support levels of 56 5/16, or sell at or near resistance levels of 67 ¾.

Your input on the above analysis is greatly appreciated!









 
Just a couple of quick questions:

1. How does decimalization eliminate scalping?

2. What are you going to do after NASDAQ decimalizes?

The Finn
 
Finn,

My previous system involved buying 5,000-10,000 shares of NYSE/AMEX stock and capturing the spread of 1/16-1/8. The spread on most of the stocks I traded is now $.01-$.03. Hence, my previous strategy is now a waste of time.

My current strategy is based on intra-day swing trading, which will not be affected at all by decimalization of the NASDAQ market. I will be trying to capture 1-6 point moves, although in this market it will probably be closer to 3 points.
 
mgregor,

I didn't have time to check all of the charts for your stocks, but checking your analysis of CHKP looks good to me. Being that the time frames to hold your trades is probably shorter now, I would pay more attention to the short term support/resistance levels you determined than the ones going back over a year ago. On CHKP the 64 area does look like a good short term support, although as of this post the futures are in the toilet and CHKP is going to gap down below that. Therefore, I would either call it no trade, or if you want to be more aggressive (Tony has typically preferred to be a long side trader) you can go short using 64 now as a resistance/stop loss level. If your analysis on the other stocks was similar to CHKP, then you've got the right idea.
 
Zboy,

Thanks for your input... it's greatly appreciated!

The reason I went back over a year on some stocks was the fact that some of these stocks are so beaten down, the only logical support levels were back in '99.

I also noticed that 4 out of the 7 stocks I follow violated their support in pre-market trading. I'll consider these for a short trade, should support turn to resistance.

I was wondering, if a stock trades below a support level pre-market, but then opens up above that level, is it still a valid support? In other words, do you count pre-market violations of support, if they don't stay below support when the market opens?

Thanks for your help!
 
Regarding pre-market support/resistance breaches, it's a bit of a gray area, although I am inclined to consider the levels still valid if the actual open is back above support, with a caveat (see below). The reasoning behind it is that pre-market trades are not included on most charts that the majority of traders look at, therefore a pre-market support breach is not as widely regarded as if it occurs during regular trading hours and shows up on the charts. For instance, a trader who only trades the last hour or two of the trading day will have no knowledge of any pre-market breaches, unless of course he or she sorted through the time & sales ticker all the way back to the pre-open. When pulling up an intraday chart for a stock, that trader would only see the highs and lows set during regular market hours, and any levels that were violated before the open are unknown to them and therefore not relevant.

That said, the one caveat I believe is that if a stock breaches support during pre-market but opens above it, that support has been considerably weakened and susceptible to breaking again. The reason for this is that all the traders who have been watching the stock since pre-market know that level was breached, and will most likely exert selling pressure after the open to move it back down, therefore making it a sort of self-fulfilling prophecy. So to sum up, my personal feeling is that a stock that breached support during pre-market but opened above it has weakened that support, and therefore should be considered a better candidate to go short through that level than to count on it bouncing up off of it.
 
For those of you following this thread, here are my actual trades for today. In pre-market trading this morning, 4 out of the 7 stocks I was following were trading below the support levels I found in my analysis.

However, 2 of the stocks were able to trade back up to or above those support levels, prior to the market opening. One of these was CMVT, and I was mislead into buying it twice. The rest of the day, I shorted stocks as they approached their previous support levels, which had now become resistance.

09:47:49 B CMVT 100 @ 73.375 -2 ISLD
09:53:02 S CMVT 100 @ 72.25 -2 ARCA
09:57:01 B CMVT 100 @ 72.00 -2 ISLD
09:59:13 S CMVT 100 @ 71.625 -2 ARCA
10:10:03 S QCOM 20 @ 50.05 -3 ISLD Short Sale
10:10:03 S QCOM 80 @ 50.001 -3 ISLD Short Sale
11:15:07 B QCOM 20 @ 47.9375 -3 ARCA Cover Short
11:15:07 B QCOM 80 @ 47.9375 -3 ARCA Cover Short
11:35:07 S CHKP 100 @ 63.875 -3 ISLD Short Sale
12:03:30 B CHKP 100 @ 61.875 -3 ARCA Cover Short
12:40:05 S CHKP 100 @ 63.875 -3 ISLD Short Sale
13:02:45 B CHKP 100 @ 65.75 -3 ARCA Cover Short
14:07:20 B CHKP 100 @ 66.00 -2 ISLD
14:15:13 S CHKP 100 @ 66.25 -2 ARCA
14:26:04 S QCOM 100 @ 50.25 -3 ISLD Short Sale
15:36:36 B QCOM 100 @ 48.75 -3 ARCA Cover Short

Totals: MB Trading
Trades: 14 Shares: 1,400 Total Comm: 73.50

As always, any comments on the above trades would be greatly appreciated.

 
I don't have that much free time to review your trades

but noticed your commissions could be reduced dramatically.
Interactive Brokers would charge you a lot less to trade which can help your overall profitability.
You might want to check them out along with a good realtime charting service like Raven quote.

Are your trying to buy bid/ask? or trade for slighly longer term.. Today wasn't a great example but are you cutting your winners short? or trailing them with a tight stop. Usually the 2nd is a better choice.

when I get some time I 'll take a look more into what you are doing
rtharp
 
rtharp,

I would never ever entrust my trading to a browser based trading system such as Interactive Brokers. To do so would be a terrible mistake. What happens when the software freezes up no me and I need to restart my computer?

I currently trade with MB Trading. My first 2 months, I get $5.00 commissions. After that, a roundturn will cost me somewhere around $33-$35, depending on the number of shares. Right now, I'm trading in lots of 100 until I get comfortable with my strategy.

Then, I'll increase my lot size to 300-600 shares. This will dramatically decrease my commissions, relative to my profits. I think Interactive Brokers makes sense for scalpers, but not intra-day swing traders.

I used to trade with Datek Online. However, my previous strategy involved scalping thinly traded issues on NYSE/AMEX. Sometimes I would wait 3-4 hours just to get a fill on the bid. I do remember one time, though, when I bought AMAT using Datek. The system went down for something like 35 minutes, and naturally, their phone lines were giving a busy signal.

What a nightmare!!! Luckily, my position was sold for a $500 profit in the end, but it could have been a disaster. That said, I've never traded with Interactive Brokers, but the mere fact that their system is Java based is enough to make me not want to. Just like Datek's Java based quote streamer, which goes down on me enough to make it annoying, I can just see my trading software going down at the most critical of times.

Bottom line, you get what you pay for.

Thanks for the input, though.
 
mgregor,

Regarding brokers, I personally do use Interactive Brokers, and have had no real problems, at least no more often than I did with other brokerages. However, if you want to stick with a Realtick broker, there are several out there that have better commissions than MB, especially for small share lot traders. For instance, JPRCapital offers $10 per trade, Successtrade offers $7.95 per trade, and I'm sure now that there are others. Commissions obviously won't make someone a better trader, but they do help, especially in this kind of market where you often have to settle for smaller point gains.
 
You must log in or register to reply here.
Back
Top