Finding Support For The Trade With Edge
Personally speaking, I’m a big
proponent of keeping the 5-minute chart
as the smallest time frame to view potential trade setups.
But sometimes, especially with the more volatile Opening Reversal plays, it
might help to find some hidden levels of support or resistance to guide your
decision-making process.
When I see a trade develop with what I consider
to be my long-term edge, it quite often revolves around the acceptance of a stop
loss in the area of .35 — give or take .05 or .10. A lot of the stocks that I
look at demand the acceptance of this amount in order to work
consistently — that’s just how I see these setups generally working out best
over the long haul.
Sometimes though, when the 5-minute chart doesn’t
show any viable technical stops in the ‘.35 ball park’ — but all the signs for
entry are there — you might find pulling the trigger a little bit easier if you
break down the classic pattern to the next smaller time frame. In some cases,
this will enable you to find some hidden levels of support that also potentially
reduce the initial amount of risk in playing the trade out of the classic
pattern.
In the following chart of Wireless Facilities, I
saw the actual triggers setting up on the 5-minute chart, which I keep up as
part of my normal ‘three-dimensional’ look at the market. My preference is for
the use of the 5, 30, and daily charts in keeping tabs on stock situations. Once
I saw the trade though, which I felt was one with tradable edge for TM
subscribers — it was also apparent that outside of using a money stop of .35
there weren’t any technical levels for stop loss mannagement that I saw as being
appropriate on this same time frame — but when drilling down to the 1-minute
chart, ‘support’ for the decision became a bit more apparent.
…so the alert goes up as the stock is
triggering on the 5-minute chart.
09:45:57
Intraday Setup Alert
Wireless Facilities (WFII)
has gapped lower into daily price supports. The stock has made session lows
at a 78% Fib retracement level, as well as channel support.
Opening Reversals will trigger above 13.34. WFII is down .75 at 13.34.
But if we look at the 1-minute chart (shown
below), we can see in this instance there might be some areas of ‘hidden
support’, which might be used to contain our initial risk to less than .35.
…Not that you really needed it in this
particular instance. Who knows though, maybe on some other occasion this lil’
trick will help keep the edge closer to your vest, rather than in someone else’s
pockets.