Daytrading With Stocks From TM's Implosion and Momentum Lists

When daytrading stocks, we want everything working in our favor. Stock selection maybe the most crucial component in having success with the markets, so narrowing our selection down to stocks already in a strong trend is absolutely in our best interest.

This brings us to TM's Momentum List and Implosion List. Stocks selected for these lists are done so through a proprietary method that gives us a solid edge in candidates that will likely continue along their respected trends. By keeping an eye on these stocks throughout the trading day, we then look for patterns presenting opportunities for us to enter.

The following are examples of recent setups from TM's TradersWire:

4-07-03

13:58:13
Intraday Setup Alert
Lowes Corp. (LTR) is forming a descending triangle on its intraday chart. The stock is a member of TM's Implosion List, and is up 0.15 at 39.39.

In this example, LTR was setting up in a descending triangle. The biggest moves of the session usually occur in the first and last two hours of the day, so we knew this increased our chances of a nice move coming out of the pattern. There's no rocket science here. We simply short the stock once it breaks support of the triangle.

The harder part of the trade is deciding where to take a profit. This largely comes down to one's tolerance for risk, though one thing we want to ensure is that we don't walk away empty handed. With two-for-one money management, we lock in a profit after a certain point, then let the other half run with a stop at breakeven. Where you decide to take a profit comes down a realistic assessment of what you should expect from the trade. We need to maintain awareness of various support levels, as well as the average volatility of the stock. Volatility bands are an excellent tool to use for stocks on our Momentum List and Implosion List.

4-14-03

13:28:41
Intraday Setup Alert
Amgen Inc. (AMGN) is forming a Slim Jim at its intraday highs. The stock is a member of TM's Momentum List, and is up 1.05 at 58.93.

Here with AMGN, we have a textbook Slim Jim breakout. The alert came in midday, and the breakout came in the afternoon with a retest at the buy point.

The move was good for a maximum of 0.45. This is by no means a home run, but it's everyday singles and doubles that really add up to big bucks by the end of the year. A trade like this that closes at the top of its daily range can be considered for an overnight hold. An overnight hold in this one would have been good for another 0.58.

4-11-03

09:55:53
Intraday Setup Alert
United Online (UNTD) is extending its Slim Jim from yesterday's session. The stock is a member of TM's Momentum List, and is up 0.19 at 18.69.

Here with UNTD we have a Slim Jim that narrowed throughout the day, then eventually broke out, but only to fall back into its base. An exit by the end of the day would have resulted in a small loss. The next day the stock shot higher, but that's the way it goes sometimes.

How you take losses as a trader is a huge determinant of your success. Losses are simply the cost of doing business. The idea is to keep them as small as possible. As long as you trade within your plan, there is no reason to ever feel bad about a loss.

4-17-03

09:58:20
Intraday Setup Alert
Patterson Dental (PDCO) is staging a counter trend rally on its intraday chart. The stock is a member of TM's Implosion List, and is down 0.34 at 37.60.

And finally, in this example with PDCO, we have a nice breakdown after a countertrend rally. This kind of entry can be tricky to pinpoint, but when the bars close with tails, it's a good indication that the stock is losing upside momentum. A look at this setup on a 15 or 30 minute chart shows a more profound setup, though simply knowing this was a part of our Implosion List gave us reason to look for an entry.

The stock gave us a maximum move of 2.19. Even though we had a nice move here, keep in mind it's the singles and doubles that pay in the long run. Two-for-one money management allows us to take a quick profit and stay in for a bigger move. Calling an exact bottom is not is nothing we expect to achieve, and more importantly, we should never feel bad about missing a move. Consistency means habitually taking the profits while they're there. The market will always be there.

Daniel Beighley