Here’s What I’m Doing With The Homebuilders

  • June 2, 2003
  • Derrick Hobbs


I have appreciated the many emails lately
about my trading style, and tonight I want to address/answer a few of
the questions. Hopefully in the process, it will help you folks to better
understand my columns.

My trading style is such that I
either trade pullbacks or extensions that manifest in the form of patterns into
a support or resistance Fibonacci price zones. Those patterns may be in the form
of:

  1. Gartley Pattern

  2. Butterfly Pattern

  3. Time Symmetry

  4. Price Symmetry

  5. Other Misc. Patterns

So, as you can see, I will
either be trading the pullback in a trend or in essence looking for reversal
trades in extended sectors or markets.

Here are a few questions I get:


What kind of market environment do you do well in?

I do well in two types of markets. A) sideways market conditions and B) trending
conditions with regular symmetrical or patterned pullbacks.


What kind of market environment do you do poorly in?

In a runaway market melt up or market melt down.

Recognizing this is critical to
a trader’s success. That is, to know your style and how it performs in various
market conditions. Not only do you recognize it, but you can then create ways to
improve upon it.

In

Friday’s column I focused in on Homebuilders. The sector is extended and
hitting many parameters that I look for in a Reversal Short Opportunity.

Are
you calling a top in that sector?

Absolutely not. I’m simply looking to extract gains in normal up and down
price movement and what I’ve found to be repeatable patterns.

Do you
look for confirmation before taking reversal trades?

Without question, I look for
confirmation. I use candlestick charts and drill down to lower time frames to
look for reasons to take a position. If there is no structural reason to enter
the trade EVEN THOUGH THE PATTERN IS COMPLETE…I
will not take the trade. It is critical to my strategy to look for confirmation.

So, going back to the homebuilders. If this sector continues to melt up, I will
potential lose some money on those trades IF I get
triggered in. I have not been triggered into those trades yet by the way. I
WILL notify you when I do though. However, if these
patterns play out as most do, I could be in for an excellent trade and add to my
bottom line.

Have a great night.


Derrik Hobbs