In Daytrading, This Is The Kind Of Price Action To Look For

  • August 24, 2005
  • Michael Kestler

Coming
into today’s trading session I was leaning to the downside and ultimately was
looking for my alerts to come up with selling opportunities.  With
the market opening down, I did not want to be focusing on strong stocks.  One of
the stocks that was on my radar was Hershey Foods
(
HSY |
Quote |
Chart |
News |
PowerRating).  HSY had been in a
downtrend for several weeks and had closed near its previous day low of $60.00. 
The $60.00 mark is extremely significant for a number of reasons.  If you look
at a daily chart you will recognize that it closed below the 200 day moving
average for the first time. HSY was also returning to a major support area at
$60.00 from July 18th as well as April 21st.  This morning
it gapped down lower on the opening it only confirmed my suspicions that the
stock had the possibility of a real push down.  I did my initial trade with a
short sale at 59.50.  The stock sold of the to 59.20 and held.  I covered at
59.30 and waited for another break below 59.20.  The first time I sold short the
break of 59.20, the stock rallied and I covered for a small loss.  I waited for
the next push down and sold short again, getting filled at 59.18.  I was
rewarded with a collapse in price to 59.00.  I added to my short position at
59.00 and placed a trailing stop of 10 cents.  I added to my short again at
58.50 but this would not work out as I was stopped out of my entire position at
58.65.

 

 

Because of some administrative
details that needed attending to, I stopped trading for a while and missed the
next push down in the stock.

 

When I returned to my trading
desk, I noticed that HSY had pushed down hard 1 more time and was now in an up
trend on a 5-minute chart.  I went long above 58.25 and sold out my position for
a gain at 58.50.

 

At this point the markets
slowed down and I stopped trading for the day.  I am looking for the markets to
slow down even more as many traders take vacation until after the Labor Day
holiday.  I will continue to provide market commentary next week, but I am not
expecting to see a lot of activity.  Of course I could be dead wrong and there
could be plenty of activity.  History is on my side, but in these tumultuous
economic times, there could be lots of activity.  If I am in front of my trading
desk, I will be prepared for whatever opportunities present themselves.  If we
continue to have a weak market I will definitely be looking for MRK to break the
27.50 mark, and ultimately selling off below 27.20.

 

Mike Kestler

Pease e-mail with any
questions you might have at

mike@evotrading.com

 

Michael Kestler is a
full-time professional trader and managing partner for Evolution Capital LLC., a
proprietary trading firm. Mr. Kestler specializes in intraday trading of NYSE
listed stocks.

Before founding Evolution Capital LLC., Michael began his career on the floor of
the CBOE. Mr. Kestler was previously a Mid-Cap and Nasdaq Market Maker.