Go Go Gadget Rally
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My latest trading lesson, Finding
Intraday Trendlines for Daytrading Part I, is also available now.
Today’s Lesson: My
Favorite Intraday Setup
If I could only trade
one pattern, it would be what I call the consolidation breakout. This pattern
has many names, and it works in all time frames. There are no guarantees in the
stock market, but you’ll be able to find this pattern on almost any day of the
week.Â
Because I’m a conservative trader, I like to use a less aggressive entry
technique. Following a move outside the trading range, I wait for a continuation
in the next price bar. I use a five-period MA as a trailing stop. In this example,
a trader may consider exiting the position on a continuation following a break
of the five-period MA.
Today’s Update:
(
TLGD |
Quote |
Chart |
News |
PowerRating)
Tollgrade
Communications
(
TGLD |
Quote |
Chart |
News |
PowerRating) is still traveling along its upward channel. Look for
continued bounces off the top and bottom of the channel, as well as continued
volume strength.
Today’s Watchlist:Â
(
DIGL |
Quote |
Chart |
News |
PowerRating),
(
VRTS |
Quote |
Chart |
News |
PowerRating),
(
JDSU |
Quote |
Chart |
News |
PowerRating),
(
DYN |
Quote |
Chart |
News |
PowerRating)
The reason I love
consolidations so much is because all I have to do is set my alerts just outside
the range and wait for a breakout. Digital Lightwave
(
DIGL |
Quote |
Chart |
News |
PowerRating)Â has been
in a range between 81 1/2 and 96 for roughly two weeks. Set your alerts just
outside of this range and watch for a continuation move.
Veritas
(
VRTS |
Quote |
Chart |
News |
PowerRating) is trapped in a similar pattern. Consider
either playing the range or waiting for a breakout. Set your alerts at 141 and
123 when playing the second strategy.
JDS Uniphase
(
JDSU |
Quote |
Chart |
News |
PowerRating) is trading near its low-level
resistance point. It returned to this level after gapping above its 50-day MA.
Remember how valuable gaps can be when a stock is trying to clear a key
resistance level. On Monday we find JDS trading just under this key level.
Although it would be nice to see a gap over resistance, we won’t make any
predictions. Set your alerts just over 125, the resistance level.
Note the resistance on the weekly charts.
Dynergy
(
DYN |
Quote |
Chart |
News |
PowerRating) is showing what I consider the closest example
of a textbook pattern that I’ve seen in a while. After putting in a new high
three weeks ago, it retraced to its 50-day MA, and then returned to the high.
Look for two possible trading opportunities. There is the potential to catch the
initial breakout, or there’s the more conservative technique of waiting for a
breakout plus a continuation.
Until Tuesday,
Waiting in the Wings:
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