SPWR - 031708

SPWR gapped down and rallied into resistance at the previous day's low (black horizontal line). It had additional resistance from the declining 34MA, and broke the short-term (morning) trendline.

I entered short when price broke the hanging man that printed above S1 (green line). I covered when price reached S2 (yellow line).

Sometimes you get lucky...

PAY gapped down and quickly fell through S2 (yellow horizontal line), and then consolidated for 5-6 bars. It printed a hanging-man candle below the consolidation level (white horizontal line); price did not break the hanging-man's low, but the next bar was a narrow-range, inside bar - I entered on a break of that bar's low.

Price collapsed over the next nine bars, and I sold on a break of the doji high. I left some money on the table as price rolled over and continued down - but I was happy with the quick, substantial profit.

LEH - 022908

Here is a simple chart - LEH broke below the R2 pivot (yellow line). It printed a hanging-man type candle, and had pressure from the declining 5MA. I covered just over an hour later when price printed a narrow-range hammer (white line).

It doesn't happen every day

But a few times a week, you can find these "no brainers".

Price gapped up, fell with the first few bars, and rallied back above the open (horizontal white line). The fifth bar was a narrow-range hammer that formed nicely on top of that level; I entered on a break of its high.




The next chart shows Fibonacci lines plotted from the opening range high to the previous day's low. Note how price reversed precisely at the Fibonacci extension.

WFR - 021508

WFR gapped down and after rallying back to the previous day's lowest close (white horizontal line), it stalled out and began printing narrow-range bars.



If you look at the second chart, you will see that the retracement zone from the previous day's high to the opening range low also corresponded with the level noted above (the previous day's lowest close) - so there were two levels of resistance.

The fourth bar was the narrowest of the morning, and an inside bar that printed just below the declining 5MA. I entered as the fifth bar took out the fourth bar's low. Price fell back to the morning low, and once it broke through that level it was a straight shot to the Fibonacci extension, where it reversed almost perfectly. I covered at that point for a nice gain.

Classic "X" trade...

I have not featured many - if any - classic Trader-X setups. Here is one - Fibonacci lines plotted from the previous day's low to the OR high. I bought on a break of the NR3 bar, which closed above the OR high and had support from a rising 5MA. I sold at the Fibonacci extension.

XLII

I am watching the Super Bowl pre-game coverage, and I am pretty sure I witnessed one of the signs of the Apocolypse:

"And now back to Ryan Seacrest on the red carpet."

WTF? It is the Super Bowl, not the Academy Awards. Am I the only one that thinks this is ridiculous?

PS - I stumbled across this and thought it was worth sharing:
"12 Things I Learned By 42 That I Wish I Knew At 22"

AVID - 020108

AVID gapped down, and I plotted the white horizontal line through the open. Price bounced around that area until the sixth bar broke through decisively. The seventh bar rallied, but closed below the open. The eighth bar printed a narrow-range, inside bar. I entered on a break of the eighth bar low.

For my exit, I plotted Fibonacci lines from the previous day's high to the opening range (OR) low. I covered when price hit the Fibonacci extension (as X always pointed out - note how it reversed shortly thereafter and rallied off that level).

CAH

There was a lot of interest in Monday's setup. CAH provided a similar opportunity, though it had (IMO) much more risk because of the wide-range bars and upper tails.

But the entry bar was an inside bar that closed strong, and was nestled in the tail of the previous bar (an X observation that he wrote about often).

Regarding "Comments" - I have not had time to answer all of them, and I apologize. But please keep making them as I (and hopefully all of us) enjoy the interaction. I will try to go through them this weekend and answer questions addressed to me.

PBR - 012808

I like this setup - a gap that provides nice white space and then reverses to take out the previous day's range.

PBR gapped down and then rallied. It took out the highest close from the day before (white line), and R2 (blue line). I entered where indicated, and closed half my position at R3 (yellow line) and held the other half until the end of the day.



Thanks for all of the comments on my "Trading Platform" post - I am trialing several options this week and will let everyone know what I decide to do. If you have additional comments, don't hesitate to post!

AG - 012308

AG gapped down, bounced off S1 (green line), and formed a swing low (white line).

After a brief rally, price fell back through the swing low and S1, and I entered on a break of the weak candle as it pulled away from the 5MA. I covered at S2 (yellow line).

K.I.S.S.

There were many short opportunities Thursday and Friday, but I wanted to focus on a long that followed the K.I.S.S. philosophy. I find several of these every week - setups that don't require a lot of thought, a lot of lines, or a lot of strategy.

AKAM gapped up and printed a wide-range first bar. The second bar was narrow-range, and "nestled" in the first bar's upper 1/3. More importantly for me, it closed above the swing high of the previous day (note the white horizontal line drawn through the highest close from the day before). It also closed just below R2 (blue horizontal line), which was somewhat negative. But the close above the white line and support from a rising 5MA offset that, and I entered on a break of the second bar high.

I was looking for a move to R3 (yellow horizontal line), and I closed the position four bars later when it hit that level. Overall it was a quick, clean 3% move.

WCG - 011508

WCG gapped above R2 and the previous day's range. It continued to rally through the morning, and around 11:30 formed a swing high and began to pullback. The decline found support at the 34MA, and WCG formed a nice base and began to rally back towards the morning high.

Just after 2:30, price crossed the morning swing high (denoted by the white line). The entry was a strong green bar that closed above that level, and had support from a rising 5MA (it did have a small upper tail which was bothersome, but overall it was a bullish candle). The next three bars were expansion bars that rallied substantially higher, but they began showing signs of weakness and leaving long upper tails. The exit was on the third bar's close, as the tail was almost half the candle's range (very bearish, especially combined with the tails on the previous two bars).

If you look at the chart below, I overlayed Fibonacci lines in the classic X style - from the previous day's close to the opening range (OR) high. You can see that the entry coincides with a move above the Fibonacci extension, which usually provides the "climate" for such an explosive run.

U-turn

Readers of Trader-X will remember this setup. Look at the chart below - the close of the first bar corresponds with the S2 pivot point (the yellow horizontal line on the chart). After rallying off the open, EGLE rolls over and falls back through that level ten bars later. Could you find a nice candle entry in the next four bars?

A simple setup - ITMN

First, thank you to everyone for all of your support and comments - much appreciated!

In comments, Rory wrote the following:

"Nice! I assume the first chart is just showing the swing high. I notice you draw the white line through the close, not the high. Is that standard for you?

The second chart shows the Fib overlay. If you entered where the black arrow is, which is a nice narrow-range bar above the white line, then your target was probably the 138% extension. Nice percentage gainer. I am looking forward to more charts on this blog."

Rory was spot-on. To answer the question, when I am drawing my horizontal lines based on swing points, I draw them through the highest close, not the high itself (or lowest close, not the low itself).

The lines at the bottom - which really don't come into play on this chart - are pivot point lines (R2, R1, PP, S1, S2). The first chart shows a white horizontal line drawn through the first swing high. The second chart shows red Fibonacci lines plotted over the morning's low to high.

Once price took out the earlier swing high, I was looking for a set-up to enter. The bar I marked as my entry was narrow range (NR3), opened at its low and closed at its high (strong candle), and had support from a rising 5MA. I closed half my position at the Fibonacci extension (five bars after entry), and held the other half until the close.

PS - good quote (and good advice) from The T.A.D. Principle Blog this morning.