Watchlist changes

I have always said that compiling a good watchlist is just as important as having a good strategy to trade. Recently, I've loosened the criteria of what makes my list and what doesn't. In doing so, I somehow got it in my mind that any stock on my list was good to trade. I lost focus. The focus of checking the opening range, where price action compared to the opening range... so forth and so on.

I reviewed every stock in my list over the past two weeks and one thing was obvious. Stocks trading in the lower (for shorts) or upper (longs) half of the opening range had a much higher probability of a good setup. So this is what I will focus on. That's the first thing I will change this week.

The second change will be my entries. I was very selective before... almost too selective. Always looking for the narrowest range bar entry and bypassing the rest. That needs to change. I need to trade the chart, not the candle. I will actively look for entries occuring around the ORH/L on strong, weak or NR bars. My preference will still be that my entry bar is NR, but more in relation to the previous bars than a % of closing price which is what I was basing it on before.

Will these changes work? Who the hell knows. But I do know these changes will put me focus on the setups that are leaning in the direction I would like the trade to go. 

Just to give you visual examples of what I'm talking about, the two charts below represent the kind of price action and opening range strength/weakness I want to look for.

-Strong first bar (weak for shorts) with price closing in the upper (lower for shorts) half.
-Price action generally staying below/above the halfway point of the OR
-Look for entry at the ORH/L with a closing price at or above (for longs) the ORH (vice versa for shorts). Stay away from entries with long upper tails (longs) or lower tails (shorts). The only exception would be a hanging man setup on a short.

CTRN - Short

I had such a small watchlist today that I didn't think I would find anything. I spotted CTRN as it was consolidating and decided to take the trade. Here's the chart:

• Placed fibs. from 1st bar low to 4th bar high
• Price retraced and consolidated along the 50% fib. level
• Entered short on a break of the 11am bar low as it broke out of the base and below the 61.8% level on increased volume
• Just like SAFM from earlier this week, I was looking to see how price was going to act at the ORL
• Exited on a break of the 12:05 bar high (harami after bullish bar)

MRO - Short

Actually surprised myself today by acting on an inside NR7 trade so quickly. What surprised me more about my MRO trade is that the inside NR7 occurred during an up bar on a potential short position. In the end... it was a very good 'dummy' entry and I'm glad I took it. Here's the trade (10-min):

• Placed fibs. from second bar low to 5th bar high
• Noticed an inside NR7 forming during the 10:50 bar right at the 61.8% fib. level. This had all the markings of a trade I'd really regret not taking if I didn't
  
• I liked the long upper tails of the 8th and 9th bar
• Entered short on a break of the 9th bar low
• Sold all my shares just above the fib. ext.

Watchlists... the perfect gift?

Remember when you were a kid on Christmas day... you woke up, ran to the Christmas tree and started tearing into your presents? That feeling, right as you were opening the present - you know - "what can it be???... hot wheels?... new Intellivision game?... remote control car?... Battlestar Gallactica action figure set???" Then, as you tore open the wrapping paper your anxious smile now turned to one of sheer disappointment after finding out all you got was... a pair of pants.
 
Some days the markets give me a pair of pants... some days a kick ass racing car set with dual remote controls.