Here's Why These Four Trades Worked

Finally, a little volatility.  Despite yesterday's narrow range in the opening hour, I managed to find four trades that worked just fine. What is important about these trades is that they were accomplished by what many traders overlook, focusing on only one stock. Most of us, when bored by the price action, move on to other areas in an attempt to find that nugget of prosperity. Rarely do we find it, most times it was right in front of our face to begin with.

Yesterday's trades were like this. I remember watching the S&Ps try to break through 940 to the downside. I knew if we got that, we would have some decent action. However, due to day-in-day-out observation of Citigroup (C | Quote | Chart | News | PowerRating), I felt the market was not heading lower. C was trading at the highs while the S&Ps were trading lower. Given that the S&Ps had been led by the action of the banks in recent sessions, it was reasonable to assume that to be the case again. Sure enough, after three failed attempts at breaking 940 and C sitting on the highs, the push up came, and C went on a nice move higher.

Was this trade a result of crackerjack chart reading? Luck? No, it was a result of good old-fashioned tape reading. You could stare at the chart all day and never see the same clues unfolding. As we all know, focus is what is required in order to achieve great results. Tape reading is something that requires focus.  So, forget about finding the stock du jour, trade the stocks you "know," there are more opportunities doing that.

Tomorrow's piece will be more in depth and deal with a subject that I hear an awful lot about recently, overtrading. This will be an insightful and helpful piece.

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