I have been making a point of writing out notes on all my trades at the end of the day. My notes on AAPL from last night said, “watch for AAPL to run up to today’s (1-12-09) breakdown point (ORL), and fail, for short entry”. Unfortunately, you actually have to follow your notes for a trade to work. AAPL did in fact run right up to that ORL and fail, with a long upper shadow. The next bar was a weak red doji that closed below resistance. The entry should have been the break of that bars low, which I passed on for some reason. Another possible short entry was after two weak doji’s right on support at bars eleven and twelve, although it was above the ORL and had some support from the previous day. Anyway, AAPL continued down past the ORL and the day’s low, but there was not much pick up in volume. Price just gently floated down. AAPL felt as if it was due for a reversal as often happens with this stock towards the end of the day. The 18th bar was ambiguous, and if you broke it down to the 5 min level (see chart inset), there was an opportunity to try a long entry, with the ORL the target. I was not sure if I should close the trade at the low of the previous day or try for the ORL. I watched price closely, and got out at the ORL, although in retrospect, on a scalp type trade like this, it may have been foolish to try for the extra 30 cents. Good for almost 3R.
Rarely if ever do I trade the Q’s, however the overall market was looking weak after the morning high, so I pulled the chart up to watch. QQQQ had failed to get past a down-sloping trendline on the 15 min chart, and then made a lower high. I won’t try and rationalize the set up, other than to say the the market felt as if it was “rolling over”, and when the 13th bar ended weak, and just off the morning low, I used it’s low as the trigger for a short. The target was the previous day’s low, which it hit on the 18th bar. Good for 2R+.
I have been trying to make trades like WLP lately, where price gaps down (or up), reverses, then fails and continues in the direction of the gap. I have only been semi-successful, and WLP was not one of the successes. WLP gaped down, and immediately began to reverse and climb back up. A hanging man formed at the declining 5 MA, which often signals the end of a move. I shorted the bottom of that candle. Price moved in my direction , but paused, and then reversed at the ORH. It attempted to rally, but failed, and then just basically went flat-line for most of the day. I pulled the trade for a .50R loss when the chart became “ambiguous”. I think I need to fine tune these type of entries. First off, a first large red bar (or green for gap ups), price rallying back to the ORH on weak volume, then printing a signal candle (hanging man, doji, inverse hammer), with the 5 ma overhead is probably a better set up. Even better would be price rallying back up and printing a signal candle at previous day’s resistance. In the case where the rally is on WRB’s, I think I need at least three before the signal candle. I will have to work on this one.
