Jun 2, 2008

FTO - Long; IBN - Short

My intuition failed me on FTO today as I entered off a break of the 10:10 bar high (5-min) and ended up partialing out and taking a full exit as I didn't 'feel it'. Sometimes it happens. I think it's the result of the lackluster market action of the past two weeks that made me just want to take profit.

IBN presented a nice opportunity off a break of the 12:35 bar low (5-min), price dropped nicely but came to a standstill at 35.16 which is where I ended up selling close to the end of the day.

A workman-like effort... positive result. I'll take it.


PDT said...

Traded FTO off of the 3/15 bar so my entry was similar to yours. Partialed at the fib ext and was stopped out on the remainder during the 12:30 sell program that took place.

Why did you decide to trade off of the 5 min chart? Was it so you could have a tighter stop? What was your stop?

OONR7 said...

pdt: congrats on your trade. If I traded FTO like I normally do (exit off the :15) then it would've been a great result. As for why the 5-min? Well, your entry off the :15 is way to far away from the 5ema than what I'm comfortable with. Also, I've been really focusing on entries off the 5-min timeframe.
My stop was 2 cents below the low of my entry bar.

PDT said...

Thanks for the reply.

I agree the 5ema is a bit far away but I decided to take that chance.
Where would you have exited if you were using the 15min, fully at the fib ext?

The one thing I do not understand is that the 5ema is reasonably close on the 5min chart but that still does not change the fact its far on the 15min. In fact if you use the 5min your stop will be tighter and will probably be stopped out quicker if price attempts to test the ema on the 15 min. How is one more riskier than the other? Or does the extra profit from a tighter stop outweigh the risk?

TL said...

Nice trading! For FTO, I noticed the range of the 1st 15-min bar is the widest in the past few days. I recall trader-X said something like, if the 1st bar is too WR, the whole move may be over in just 1 bar.

Do you find that to be a negative, or if it sets up nicely with a low-risk entry, you would take it regardless of that? Thanks in advance!

OONR7 said...

pdt: I should've exited just below the fib. ext. I think we commented last week about why I don't carry my shares past the fib. ext. and FTO is a good example. If you had carried your shares then you most likely would've been stopped out after that huge downward move on the 12:30 bar (:15). Again... I just don't see the reward relative to the risk (and stress).
As for the 5-min and 5ema question... let me just say that my entry on the 5-min was also a little bit further away from the 5ema than what I like so it really is a judgement call. Personally, I feel much more comfortable buying off areas of support (for longs) than buying off a candle. What I didn't like in the :15 chart was that the 3rd candle wasn't really anything special: wasn't close to the 5ema... or right at the ORH or part of a pullback. If anything it was due for a pullback after 2 relatively wide bars with the 3rd contracting a bit. It actually did just that in bars 5-8 which, for me, would've been an area for entry (I had an order for entry on a break of the 11am bar but it never triggered on the next bar). As for the 5-min chart... I was much more comfortable with my entry because: it was off of a consolidation move... had support from the 5ema... closed very strongly... followed another strong bar and was just above the $32 mark. My level of comfort for this entry off the 5-min chart was great.
You make a good argument regarding the 5-min 5ema versus the 15-min but I would just say to you that having the right entry can make all the difference in the world. I indeed use the 5-min chart for entry to increase my position size while also decreasing my risk. With that being said... I am starting to thinking about placing my stop based on the previous bar's (to entry) low instead of my entry bar low. That would give me some cushion (but also increase the spread). I may just use it on stocks where the entry bar isn't as close to the 5ema (like FTO).

tl: thanks. The first bar was wide but, just eyeballing, it didn't seem so wide that it would absorb most of the day's move. I don't really compare the first bar to previous days' first bars but if that's something you do then I would comment that volume was also much higher for the first bar than in previous days. For me... I try to eliminate gap stocks whose first bar isn't wide enough and I'm even going so far as to eliminate stocks whose first bars close against the gap direction. It's a good way to focus on good setups and make my watchlist more manageable.

TL said...

I think I didn't make it clear enough. For FTO, the range of the 1st bar is wider than any other 15-min bar in the past few days. Do you find it to be something to worry about? I don't have a solid answer because on one hand, the stock may have the entire move over, while on the other hand, momentum seems strong especially when volume is usually hugh on those super volatile bars.

TL said...

Just to add, I really like when you said "I feel much more comfortable buying off areas of support (for longs) than buying off a candle." Very well said!

OONR7 said...

tl: I understood what you meant and, just looking at the chart, I would not say the first bar was too wide. Now, even if it's range is wider than any of the previous days' candles... today's volume was much more than in any of the previous days. So... volume is a key indicator. Typically... if a first bar is too wide subsequent candles will be very narrow and volume will really dry up. At least that's been my interpretation.
And as for resistance and support... yeah, S&R is a concept that, for some reason, took me a long time to understand. I found myself a couple of years just looking at the candle and not really looking at the big picture and where the candle was forming. Areas of support/resistance can be:
Intraday pivot points
$1 and .50 areas

I've been trying to limit my entries to candles that have cleared these areas.

PDT said...

Oh yea I do remember the convo we had about trying to go beyond the fib ext. I have the memory of a gold fish :)

Thanks for the lengthy reply, you make some really good points. Thats why I love this blog!