Lack Of Volatility Doesn’t Have To Mean Lack Of Profits, Here’s How To Find Good Trades
As mentioned in an article a few weeks back, much has changed for HVT/scalpers
since 2003 – the volatility – while present – is elusive at times, and requires
some computer horsepower to isolate stocks that are exhibiting the volatility
needed for HVT-style trading. Another aspect that I feel has changed is
that price/trend persistency is more evident in stocks that are exhibiting the
volatility (velocity) needed for HVT. What I mean by this is the ability
to extend the time frame a bit and turn it into more of an intra-day swing trade
with the assistance of a 15 and/or 60-min chart. What is useful about this
technique is that we can still get into the trade via the standard HVT entry
technique, but still retain a portion of your original position in the
expectation that bigger gains could be had. An example will illustrate
this.
Biogen
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BIIB |
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PowerRating) for whatever reason (we never need to know why!) was in
play early on Thursday morning as evidenced by our velocity indicator – meaning
that prices were making rapid gains (i.e. range expansion bars), it was a stock
worth watching. As the charts below show, after the initial burst higher
we needed to wait for some time in order to determine if the move was a one off
event or if there would be price persistency. The chart shows patience was
rewarded as there were potentially four HVT longs of which we took two.
The point of today’s article however, is how you can take these big moves in
a stocks and apply some slightly longer-term analysis. As mentioned on
Tuesday, stocks that hit our radar screens as being in play will often maintain
fib readings of over 80 (meaning they have pulled back less than 20% of the days
range) this is particularly of interest when you have a sideways to down market
– hence the stock is stronger than the overall market. BIIB fell into this
category right at the time we were looking to go long. Other stocks that
maintained high Fib Gauge readings were
(
RIMM |
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SNDK |
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(
LOW |
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(
BSC |
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(
QLGC |
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PowerRating) – all of
which offered decent trades, both HVT and intra-day swing trades.
In all fairness, we know that not every trade works out no matter how good
the set-up looks, it is simply a matter of incorrect analysis or poor timing or
just bad luck. While it is always easy to go back and isolate why a trade
worked or did not there are times when a trade set-up, despite looking solid,
will provide some clues to the careful observer that it simply will not pan out.Â
Next week I will highlight some trades that fall into this category. In
addition, Tuesday’s article will deal with using a list of hot stocks from the
previous day in order to isolate set-ups the following day.
As always, feel free to send me your comments and questions.
Dave Floyd is a professional FX and stock trader based in
Bend, OR and the President of Aspen Trading Group. Dave’s approach to FX
combines technical and fundamental analysis that results in trades that fall
into the swing trading time frame of several hours to several days.