Finding Insight

  • March 30, 2001
  • Duke Heberlein

A common misconception about the setups we profile in the Insights
From the War Room is that they are geared for specific traders
and specific trading styles. While this may be true for our Intraday Setup
Alerts, the majority of the setups can be used by traders of different time
frames. A good example of how this plays out can be seen in yesterday’s alert in
Rent-A-Center:

 

11:38:57

 Rent-A-Center (RCII)
is trying to move out of a pullback from the March 26 high. The issue is now
trading near yesterday’s high at 43 3/8, up 3/16, and it has a TradingMarkets.com
3-month RS ranking of 90.

 

Often the pullback on the daily chart is thought of as a setup for a swing
trader, but many daytraders key off patterns on the daily chart to spot good
candidates for day trades. At the time of the profile at 11:38, the stock was
trading close to the previous high. A look at the chart shows the stock is in a
good uptrend, and has slightly undercut the 20-day moving average and a
trendline and reversed, which can be a bullish indication of a shake-out move
and continuation in the direction of the underlying trend.

 

 

From there the stock takes off, and is posting further gains
today. However, daytraders could have also benefited from this setup. Eyeballing
the intraday chart, the stock makes a false move to new high territory before
bleeding back into the previous intraday range. From here it fails, in the fact
that it does not take off immediately, but patient traders willing to
“stalk the stock” are rewarded when a late-day breakout above an
intraday triple top, or what Jeff Cooper calls a Rule of Four Breakout, gains
nearly 3 points in 20 minutes after a pullback/shake out move.

 

 

This is just one example of how players in different time frames
can benefit from the setups we profile. Keep a list of the stocks we note each
day and look at the daily and intraday charts each night. This is a great way to
uncover stocks that will yield setups that you can pull profit out of the market
from.

Have a great weekend!

Duke