Sharing Some Setups
I get several questions each day asking to show some
specific trades that I did with some commentary to walk you through.
The last few days have offered many great setups, so I figured I would share a
few with you.
I look at trading each day from two perspectives:
- My ability to read the tape.
- My ability to read the charts.
You can have one without the other from time to time and still produce great
results. However, when you have technical levels coming together with your
overall feel that the direction is about to change, or a pattern is setting up,
you then have tremendous conviction on a trade and need to go for the throat.
The two charts below are excellent examples of this.
The Citibank (C) chart is the standard
chart I look at for both the stocks I trade as well as the S&P futures. I am
mainly trying to identify the trend as well as determine areas where a reversal
may be imminent, such as the moving average or other level that I feel offers
support or resistance. In this example, there really is no trend initially, the
chart is moving sideways. However, you will notice that C will not break below
$42.20. This was a KTN I had determined
ahead of time. I did not go long initially just because C was at $42.20 (Point
A), that would have been a low-probability trade, but when I combined
the fact that the S&Ps were stabilizing and showing signs of going higher as
well as several large trades (prints) hitting the bid in C at 42.20 and it not
disappearing, it was obvious to me it was a low-risk entry.
Point C is a trade I would have taken
normally, however, with another KTN, 42.63, which had been resistance, now
becoming support with confirmation from the S&Ps, I was all over the trade.
The last example illustrates a case of when to break rules. The chart of Intel
(INTC) is clearly in an uptrend. However, you will notice it running into solid
resistance at 22.96, bumping it 4 times. The S&Ps were also experiencing a
little resistance, so with a very tight stop above 22.96, a short sale was
entered. It is debatable whether or not this trade represents a higher
risk/reward scenario. With a tight stop it seems reasonable, however, whenever I
buck the trend I feel uncomfortable. I am not smart enough to call tops and
bottoms, but sometimes you need to stick your neck out.
It looks as though we are in for a roller coaster ride this morning with the
futures down pretty good across the board. Fasten you seat belts, this may be
fun. If the selling stays around, make sure you keep an eye on the gold stocks,
as they will probably come into play as a safe haven type trade.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 1049 | 1169 |
| 1045 | 1152 |
| 1039-40 (confluence) | 1133-36 |
| 1031.9 (key support) | 1110 |
| 1022 | 1087 |
| 1010 |
As always, feel free to send me your comments and
questions. See you in TradersWire.
P.S. Click
here if you would like to know the KTNs where I’m looking for
reversals in the most actively traded stocks.