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My latest trading lesson, Finding
Intraday Trendlines for Daytrading Part I, is also available now.
It’s time for our weekly look at the Nasdaq Composite. We find it just where
we left it last week.
Today’s Lesson: Aggressive
Breakout
Taking a look at Rambus
(
RMBS |
Quote |
Chart |
News |
PowerRating)
from Thursday, we see the stock trending off its lows in an upward channel. When
a stock starts to move off its lows, I like to start drawing trendlines after
nine five-minute bars. When using a more aggressive style, you may consider
looking for a 1/4 point move outside the channel. Upon entry, I use the
five-period MA as a trendline. Although you’ll often see that I wait for the
continuation in both my entries and my exits, I do not do so when I use a more
aggressive entry. I then watch for a break of the five-period MA by 1/4 point.
The amount of breakage that I will accept depends on how much I’m ahead on the
position. For example, if I’m up 6 points, I’ll allow for a greater breakdown
level.
Â
Today’s Watchlist:Â
(
FLEX |
Quote |
Chart |
News |
PowerRating),
(
TLGD |
Quote |
Chart |
News |
PowerRating),
(
PAYX |
Quote |
Chart |
News |
PowerRating),
(
NSIT |
Quote |
Chart |
News |
PowerRating)
Flextronics
(
FLEX |
Quote |
Chart |
News |
PowerRating) was added to our Watchlist last week when it put in a
three-bar pullback from highs. It has now returned to resistance as we hoped. At
this point we’ll monitor Flextronics for a move above this level followed by a
continuation. As with any pattern, there are different ways to play a breakout.
The first includes catching the initial move on the breakout day, while the
other involves watching for a continuation on the following day.Â
Tollgrade Communications
(
TLGD |
Quote |
Chart |
News |
PowerRating) has done quite well for us
over the last few months, and it’s back again. Tollgrade has already broken out
by gapping above resistance. It’s currently in an upward trending channel that
is backed by strong volume. Buyers continue to push the stock higher. Watch for
bounces off the top and bottom of the channel when looking for entry points.
Ideally, we will see a continuation of the strong volume.
Paychex
(
PAYX |
Quote |
Chart |
News |
PowerRating) is in the first stage of a breakout. On
Thursday it was able to push above resistance after a brief pullback from its
new highs. Watch for a continuation next week. After the close, set your alerts
on Paychex at least 1/4 point above Friday’s intraday high.
Lastly, Insight
(
NSIT |
Quote |
Chart |
News |
PowerRating) is in the second phase of its
breakout, putting in a continuation day on Friday. Look for the stock to
continue higher. We have been monitoring Insight as it continues to trace out
new chart patterns. The initial breakout from the pennant provided a daytrading
opportunity. This new breakout to all-time highs may provide the short-term
swing trader with opportunities. Look for volume strength to continue.
I’m pleased to see so many good setups while the Nasdaq is stuck
in its trading range. Have your entry points and exits written out, so that
you’ll be prepared in the case of a breakout.
Have a great weekend,
Check back Monday morning at 9:15AM
ET for Trading the Open.