Good morning everybody!
So, I awoke today intent on trying out my new trading strategy - the Superheroes day trading strategy. The idea is to watch stocks that are volatile, identify good candidates for a midday rise and then to trade the uptrends.
I ran the Superheroes market scan from Stockscores and didn't like what I saw. In order to get myself more candidates to consider, I decided to try the Globe and Mail Report on Business Market Action page. At the bottom of the page are boxes showing the biggest gainers and losers during the day from each index. I look specifically at the US Indicies as it seems to be easier to trade US rather than Canadian stocks right now on TradeFreedom. I need to learn a bit more about the symbols for Canadian stocks and how to get the info in the TradeFreedom platform.
My idea is to grab the top 100 losers from the NSE and Nasdaq pages to see which stocks have trended down most of the day (I'm doing this scan today after two hours of trading although it can be done as early as one hour into trading). I will then enter each of the symbols from these top 100 loser lists into my trading platform and look for charts that show a good set-up.
I am specifically looking for stocks that had a steady downtrend, but seemed to have stopped out on the downward trend. I then want to see a bit of sideways movement, preferably with rising bottoms, to a clearly defined trend line.
In my scan of the first 10 stocks on NSE (listed in order of biggest % losses), I find three candidates - FUN, PFE, TWI. In addition, my friend from Friday, MSCC, has also had a big uptrend followed by a big downtrend today. I want to watch these four stocks to see what develops.
Let's look at all three around 9:45 am.
MSCC opened at 8.11 but rose within the first hour to 8.84. It had a bursting bubble candle and then started a steady decline which seems to have stopped out around 8.10. As I watch right now, it has clearly broken it's downward trend line and has begun to rise again. It did not move sideways much at all. It seems first intermediate resistance is around 8.40 with secondary resistance up at 8.84. It seems like the entry signal came about 8.25 with support at 8.12 (0.13 risk). With initial resistance at 8.40, we only have 0.15 of upside to 0.13 of downside, so this trade is not ideal. We'll keep an eye on it to see if we learn anything on how the stock performs. Stay tuned.
FUN opened at 11.92 and steadily moved lower. The stock seemed to bottom out at 10.55 and then move horizontally with rising bottoms. I saw support at 10.60 and resistance around 11.15. Entry was at 10.69 giving 0.46 of upside and .09 of downside, a 5-1 ratio. This trade was attractive enough that I enter a 150 share position. If the stock fell below 10.60 on the 1 minute chart, I was out. A break of 10.75 would mean the stock was on its way up. Unfortunately, the stock broke down from its rising bottoms and I exited at 10.51. A closer look at the 2 minute chart over the past two days shows that the stock has yet to break its longer term down trend. It had simply broken its shorter term downtrend from today. Time frame analysis!
TWI seems to have suffered from the same issue as FUN - a breaking of its short term downward trend line but not a longer term downward trend line. It is not a good trade.
PFE appears to have broken its downward trend line after gapping down at the open. But its short term resistance is not sufficient to garner a good risk-reward ratio. This is not a good trade.
Let's switch over to the Nasdaq and the above stocks alone....
Okay, so it is now just before the close. Here is a summary of my day since I exited FUN.
I indeed checked out the market movers from Nasdaq but could not find anything worth tracking. I did, however, keep my eye on MSCC throughout the day as it seemed to be consolidating in a pennant pattern with rising bottoms. I saw an entry point at 8.28, with support at 8.19. As I mentioned earlier, I saw short-term resistance at 8.40ish and longer term resistance at 8.84. I bought 100 shares.
Guess what happened? The stock fell below support and I exited at 8.15.
My analysis: I fell in love with this stock. I remembered my success on Friday and bent my rules a bit. I allowed shorter-term resistance around 8.35 to be ignored and also ignored a slight falling top. I saw what I wanted to see and ignored the rest. The stock did fall below support but closed the day moving horizontally. I did not get the entry signal that would have precipitated entering a trade.
After this, I kept watching some day trading stocks but did not see anything favourable I turned my attention to a couple of swing trades, Overnight Holds and Pull Back Plays. Nothing on the Pullback plays caught my eye but I did see two stocks on the Overnight holds which I believe satisfy the rules laid out in the strategy on Stockscores - DPW and PLG.TO.
They have moved a bunch today but have been steady into the close. I hope to catch early morning emotion from people who failed to get in on the action today which will push the stock higher early. I will exit if my play is incorrect, that is if the stocks close below support on the 1 or 2 minute charts. If they gap lower, my risk is higher obviously. If they go up, then I will ride the upward trend until I get an exit signal.
Let me detail my two buys:
DWF just signed an agreement with Cisco, obviously a good thing for any small company. It usually has lower volume but today moved up on higher volume about 37.5%. That should catch some people's eyes overnight so that there will be some buyers in the morning. This is a low volume stock and it did not close around its high for the day, so I may be in trouble. We will see. My entry was at $1.09 with support at $1.05. It is right at longer term resistance, so any move to the upside is likely to be short lived. I have to be ready right at the bell tomorrow.
PLG.TO is a mining stock that delivered some favourable news about one of its properties. It closed up about 35% today, which should also catch some people's eyes looking for strngth in the seriously depressed commodity sector. Unlike with DWF, this stock closed at its high and was stable into the close. Volume was abnormal today but it tyically has decent volume. I entered at $2.14 and support is at $2.08. Longer term resistance is around 2.70.
So, I will see you tomorrow at the bell. Keep your fingers crossed.
Mike The Diversified Trader
No comments:
Post a Comment