Rise or Fall - 6/09/07
Here's the idea: once a week I'll post segments of charts I either traded or thought of trading and ask you - with all the information you see on the chart - do you think the stock will rise or fall.
I like this exercise because it's good practice for realtime trading. Often times, we look at charts at the end of the day and it's easy to say, 'yeah, I would've entered there.' However, can you call it as it's about to happen?
All I ask is if you think the stock will rise or fall and why. You can also say you wouldn't enter the trade given the information presented.
I'll post the actual chart a few days later or... if no one's commented I'll show it... right after jumping out a window from blogging loneliness.
EDIT: Forgot to mention, this is a 5-min chart.
I've also cut out the stock info so you cheaters can't... well, cheat.
Posts
19 comments:
Given the information, I would not enter long. Reason - price has not closed above the 50% retracement or cleared the 61.8% Fibonacci retracement from the day's move (high to low). There is one bullish thing here - it closed above the 5MA. But looking at the big picture, the odds are it will turn back down at this point.
Now if it DOES clear those levels (50% and 61.8% retracement) and gives me a nice candle set-up, I would be inclined to go long at that point.
Hmmm...looking at the chart again, I would still stand by my first comment but in addition to closing above the 5MA, it has made a nice pullback/consolidation ending with that narrow-range, inside bar. So it could be ready to take-off.
But I still don't enter below the 50 and 61.8% as the majority of the time that resistance will be tough to take out. I wait for a move above those levels and a set-up.
So bottom line is if you take more risk, you might enter the set-up. If you are more risk adverse like me, you pass and wait for an entry above the levels I mentioned. With my option, you run the risk of missing a move if it explodes here...but with my option, I win more than I lose!
Good idea for a weekly post, by the way.
00NR7,
Great concept with showing a segment of a chart and having us think what to do. Unfortunately I don't know enough yet to venture an opinion, it would just be an uneducated guess. But I hope to learn and eventually post my predictions.
Thanks for your efforts,
Mike
X... great observations and exactly the kind of feedback this exercise is meant showcase. I agree with everything you said about not going long. In fact, I was looking short at this time for the following reasons:
- price had already retraced to the 38% level and fallen back. This tells me the stock has short tendencies
- the 10:25 and 10:30 candles both left upper tails at the 50% level.. very bearish
- the 10:35 candle was very close to being an inverted hammer with a significant increase in volume
There's one thing I forgot to mention on the chart. The daily chart showed previous support at the 52.50 level.
Also, the fact that these candles were above the 5ema did give me cause for concern and I think your comments about where and when to possibly go long make a lot of sense!!
Stay tuned for the big reveal. Dah, dah, dah, dum!!!!
Mike... thanks for commenting. I do hope you keep coming back as this exercise really does lend itself to folks who trade using candlesticks and fibonacci levels.
Also, this is also a great way for me to get information from fellow traders as well. I'm so selfish... aren't I????
downgap, so I would trade it from the short side only (unless it had a really strong dialy chart and was at strong support)
the retest of the low and the volume increase would prevent me from entering this as a short (especially since you mentioned higher timeframe support, something I always check)
If anything I would wait for an intraday momentum change to the downside before considering this as a short
But for now there are just too much signs of at least an intraday reversal
I never enter a trade without knowing what the larger timeframes look like, but I'd say the direction was up for the time now, so no trade (yet)
Wonderful idea. Looking forward to giving my 2 cents. While pullback was orderly, should've held above low and not retest. Don't like the A+ vol swell on the rally, especially since it was not on a classic c/stick bottom pattern, such as, bullish engulfing. I expect the stock to breakdown or move sideways. Besides too far away from WOR high or low for me to consider a position. Normally I like to see a consolidation at WOR high/low and trending above/below rising/falling 5 EMA before entry. (on the 15-min and 5-min chart). I also want the expansion break-out bar to penetrate WOR high/low. Thanks, Rudy
@tvr, rudy... great analysis.
Awesome concept! If you ask me, this is as realistic as you can get. Maybe(if your time allows) you could actually post these types of setups 2-3 a week, the more practice the better. I think everyone can always use more practice(I know I always can).
I would have to say that since it broke below the 9:40 candle(on the 10:00 attempt) with lighter volume and posted a rejection with higher volume on the very next bar, that a retest of low is needed. If it fails(no break of low) on the retest, a long position could be initiated with a stop at the low of the retest. Then look to volume for indication as it approaches the high of the 10:30 candle level(if this is as high as it goes before the retest/otherwise use the highest high before retest). If volume is strong enough, next target would be high of the 9:40 candle(which is the next high volume), then the bottom of gap(ORH), then 1st fib. ext. and so on... *If it does not fail the original retest of the 10:05 candle(actually breaks lower), a short entry would be break/close below the 10:05 candle low with the stop at the high of the 10:05 candle if in coordination with 5 day ma.
Sorry for the long explanation, but I am somewhat new to all this. tks!
@anon... glad you like the feature. I'm shooting for one a week right now as I plan on featuring other trades during the week as well. I may keep Rise or Fall for the weekend since I find there's not much new stuff posted on blogs.
After reading your analysis... I don't think I know what your prediction is. Will it rise, fall or would you not enter the trade at this point (the last candle on the screen)?
OONR7,
Great initiative... much harder to commit a opinion without knowing what comes out the right edge...
I would be thinking on going long at the moment. Trading above 61.8% level and clearing the high of the 09:40 bar would be the confirmation I would be waiting for. I see volume increasing on green bars, failure to take out the OR low(10:00), trading above 5ema.
Buyers are more aggressive at the 52 level(relative big lower shadow on 9:40 candle and relative strong reversal at 10:05).
If you look at the 3 candles(10:00 to 10:10), they form a nice hammer on 15 min under relative high volume. The next 3 candles make a close above this 15 min hammer.
We got almost 1 hour trading between the limits of the 09:40 candle(in fact we got few trades below the low)
Anon replying back....
You have a good point....perfect for weekends!
Sorry 'bout that, got carried away and never answered the real question! To answer the question: I could not put $$ on this without the candles answering further criteria(as I listed above). That is....I could not enter the trade given the information provided. I find that the volume on the 10:05 candle is too large to try to break thru without more consolidation or further retracement(to the upside), so the risk reward is not there. If I had to make a choice of up or down, I would have to say up because 10:05 candle is support and not a whole lot of downward volume resistance. The farther upward it climbs, the less volume there is to challenge. So far good volume up(since bottom) and retracement is on lighter volume.
Thanks for the response on my post, and once again...great stuff!
One question...will you also let us know if/if not you entered the trade with this presented info? And why/why not? It would be awesome if you could share that also.....tks.
Volume on the gap down is not much higher than the end of the previous day. If this stock was really weak I would expect to see more volume on the OR than the previous late day volume.
Volume on the green bars is much higher than the red bars. So based on volume patterns it leans more towards a long than a short.
However, I would not plan an entry at the point where the chart ends. Prior to committing money on a long, I would like to see some more NRBs on lower volume and either a retest of the low - preferably a higher low.
I have tried to short many of these stocks on earlier bars, only to have them test the low and hold. They then recapture the 5ma, and make a strong "test" move up. All that is needed is a NR bar in the upper half of the test move, and watch out baby. First target is high of OR, second target is the bottom of the gap from the previous day. This would be my analysis if the chart stopped with the 13th bar, but I see a NR bar to the right of it that I don't like, so I would stay away from it, looks too much like a "coin flip" here. If I had to trade it, I think on a break of the 13th bar high I would start to scale in, and fill the rest on the break of the 3rd bar high. A pick up in volume would be nice, as well as a bullish overall market, and some context from a daily chart. I would also like a slice of pizza.
ADD Trader
Great idea, short on the break of the current bar and 5 EMA
jonzfish
Wow... this is going to be a real educational feature for me.
@jao: great points.
@anon: I will let you know if I traded the stock.
@jamie: would you discount this stock because the volume was not higher at the open?
@add trader: deep dish or thin crust?
Sweet. Long @52.70, stop @52.50.
In general, I look for gappers to trade at much higher than average volume levels. That is my number 1 criteria for gaps. However, I would not discount a short setup because volume was not higher on the open. Sometimes stocks get off to a slow start and pick up volume after 10:00.
In this particular setup as decribed, I assumed that the stock was testing support for the first time and a solid support level usually holds on the first test. I then looked for clues in the volume pattern to support my theory for a long.
thanks for the insight Jamie... good stuff.
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