3SOF

Posts regarding Bear Traps.

Quote from: Melf Elf on July 28, 2006, 06:57:51 AM

Quote from: AussieTrader on July 28, 2006, 05:37:22 AM
200 day now key support zone, if that fails it won't be nice. Fundamentally NTRI 'should' come back, current market and sentiment however currently disagrees.

Watching for bottom to be put in around the 200 day.

Good Trading

Aussie,

Good observation.  Applause. 

Yes, NTRI really needs to bottom in that area because it's TRIPLE support.  Before we get to that, a quick review of a few technical features,  which we've all discussed in other folders:

1. Starting with the Right Shoulder of the H&S Top at 44.80 on February 27:

When the high of a Right Shoulder gets taken out to the upside, you don't want to stay short (discussed in the ESLR and GIGM folders).

In the case of ESLR, the takeout was a Bull Trap fakeout, but there were other opportunites to re-short it.

In the case of GIGM, it was the beginning of a huge 100%+ rally.

When the high of the Head gets taken out to the upside (like GIGM and NTRI), you really, really don't want to stay short.  You want to get long (also discussed in the GIGM folder).

In the case of NTRI, look what happened after the high of the Head (50.00) got taken out. 

Horrible short squeeze.  That giant April 25 gap probably was the last earnings release, but it also was fueled by players caught short, having to buy to cover.

2. The June 16 break of the channel (in blue).

Shorting that break is fine.  "Sell, or sell short, breaks of support." But, have a reasonable stop.

That break ended up being a gap-filling Bear Trap (the 52.75 gap before April earnings was filled), then NTRI went back up through the channel (in blue), "trapping" bears below the channel. 

3. "When a stock has a terrible gap down at the open, I sell AT THE MARKET, without hesitation."  That doesn't always mean that the stock won't have a snapback rally, but in the vast majority of cases, the stock is going lower.  We've had many, many examples of stocks like NTRI that we've discussed in other folders over the past year.

Notice that when NTRI gapped down on Tuesday, the top of the channel (in blue) was at 59.90.  NTRI open at 59.73, rallied a bit, then tanked.  UGH..it looks like someone grabbed that pre-earnings white candle by the throat, and slammed it back inside the channel.

Just from that 59.73 gap down alone, NTRI is down an additional 18.47% at yesterday's 48.70 close.

 

Many 3SOF members won't hold through earnings, which sure isn't a bad strategy.  But, again, and this is only a suggestion, if you're caught holding on a slam to the downside, particularly below support, get out.  And, certainly don't "buy more" because it's cheap...or because "the stock shouldn't have done that."

NTRI, prior to earnings, had found support at the top of the channel, and was in rally mode.  That top of the channel support got taken out at the gap down opening.   

There are plenty of other stocks to buy.  Don't buy one that is tanking on "try to catch a piano being thrown off the top of a buliding" volume.  NTRI's volume on Tuesday was the highest in at least two years, if not longer.

TRIPLE SUPPORT:

NTRI, as Aussie said, is coming into 200 DMA support, as well as channel support (blue) and neckline/trendline support:

1. 47.55 - 200 DMA

2. 46.84 - Bottom of the channel (blue).  It falls 0.314 points per day.

3. 46.43 - Neckline/Trendline (red).  It rises 0.094 per day.

Volume on this slam to the downside has been huge, so I'm only going to play it for a quick bounce with a 2-3% stop loss if NTRI falls into the 46s, and only because it "should be" TRIPLE support.

Good luck, if anyone plays it.

 

The more posts I read from other 3SOF members the more confirmations I get.

This would be my most recent ideal set up:

Going in with upside momentum.

Active in the premarket.

Price above the weekly 200,50, and 8 moving averages.
Price above the previous week's high.
Price pulled back for 3 days
The 3rd day being a reversal candle ( Doji, Takuri,Inverted hammer,etc.)
Positive net price (open above the previous day's close)
Preferably the open is below the previous day's high (not a gap up)
Trading at least 25 cents above the open.
Market makers lining up at the ask (Ask side thicker than the bid side)
Level 2 showing more risk going long than short.
Multiple timeframes uptrending and trading close to the day's high.
Bid refreshing with 100 shares.
Ax near or at the best offer.
Time and sales print lots of green
Spread is tight or locked.
Block trades of more than 25,000 shares on the green gets printed
Ax leaves the offer.

Indicators that I would like to see are:

1 Tight Bollinger Band being broken with big volume.
2 MACD crossing at or above the centerline.
3 Stochastics crossing up.
4 RSI pointing up.

If I don't see an upside momentum opportunity, then I'll go with the alternative - buying close to perceived support.

1 Momentum low
2 Shakeout
3 Bear traps

Watch List: LMRA,SMDI,SIGA,RMTR,BRCD,CORI,CHRZ,BDSI

MAMA = Watching 4.47 Support
previous hour's high = 5.15
previous hour's low  = 5.05

In MAMA:5.15

Got in on weakness while the minute chart was pulling back to 5.15 (after it made a higher high on the hourly chart) because it's close to the hourly 50 ma Support and hourly chart made a higher high.
If this doesn't do it's thing, my next buy target is around 4.47

In LMRA at 4.94

Out LMRA: 4.90

In RMTR: 3.23

Out MAMA:5.03

Out RMTR:3.10

MAMA In= 5.15
MAMA Out = 5.03
Loss = 0.12
Tried to get in close to support but had to get out when it showed weakness.

LMRA In = 4.94
LMRA Out= 4.90
Loss = 0.04
Tried to ride with momentum and bought into strength but did not have enough buyers.


RMTR In = 3.23
RMTR Out = 3.10
Loss = 0.13
Tried to ride with momentum on this one too and bought into srtength but again it did not have enough buyers.

Watching LMRA's 4.88 resistance.

In LMRA:4.88

I'm trying to go with the trend with this one yet it doesn't seem to be doing what I'm anticipating it to do.

First, I went in with momentum.
Now, I'm giving another chance with an entry after the hourly pullback.

The less confirmations I get from my ideal set up the less chances I have making a profit.

Any suggestions on how to control emotions?

I was looking at LMRA's 4.88 resistance with the plan of waiting for lots of green or a block trade to break it on the time and sales.

I went in WITHOUT seeing that!

I got caught in a bull trap instead.

Out LMRA: 4.77

In LMRA: 4.88
Out LMRA: 4.77
Loss: 0.11

Quote from: Ares on February 11, 2007, 10:27:50 AM

I'm a Transit Operator. Most of the time, at the end of the loop, I read. If my eye won't hurt, I don't have to eat or sleep, and have no other responsibilities, I'll probably keep on reading.

Some of the books I've  read were:
1) The Market Maker's Edge by Josh Lukeman
2) Swift Trader by Charles Kim
3) Bollinger on Bollinger Bands by John Bollinger
4) by David Nassar
5) by "Trader Vic" Victor Sperandeo
6) Japanese Candlestick Charting by Steve Nison
7) a booklet from Vision Investing

Some of the Sites I check from time to time is:
1) NASDAQ.com and
2) StockScores

I took a course with:
1) Teach me to Trade and
2) Cyber Trading University

My main problem is controlling my emotions and respecting the trading plan I made before pulling the trigger to buy a stock that interest me.

Ares,

Hi.

Last time I saw you we were side by side in our buses at the light on Seymour at West Georgia. Obviously I took your tip to check out this site. I couldn't get registered until I finally tried disabling Yahoo Mail's Spam Filter temporarily. For some reason mail from this site's server was being flagged as Spam. Anyway I'm in now and it seems a good site.

To all you guys reading Ares's thread here I have to say I am impressed by his determination. As we both do the same job (though I'm a better driver.  ) I know how very stressful it can be.  For him to do that; keep a wife and three kids clothed, fed, and sheltered, plus get up well before the market opens (at 6:30 AM local), well, as I said, I'm impressed. Kudos Ares! I sure hope your determination pays off and you mature into a winning trader - sooner rather than later. (The same wish goes for me btw.  )

Ares first expressed interest in trading about three years ago. Right Ares? At that time I had much more limited (and bitter) experience but gave him whatever advise I thought useful. Seems he's been plugging away learning from the school of hard knocks that so many of us have done.

Judging by the list of books above you've done more reading than me. There is one book I've read that I believe I mentioned to you but I don't see on your list. It's called:

Reminiscences of a Stock Operator

(ISBN-10: 0471770884 ISBN-13: 978-0471770886)

It seems to be highly regarded amongst successful traders that have been asked what books helped them in their learning. I certainly enjoyed it - but then what do I know? 

It's an old book written in the early 1900s when there were only hundreds instead of many thousands of stocks to trade. It's a bit dated as back then a trader could get to know the quirks of pretty well all the stocks. Nowadays that's impossible of course. (Then again though, now we have fancy computers for stock screening and technical analysis). It tells the fictional tale of the ups and downs of a, well, Stock Operator, and is meant to help one learn sound trading psychology. (As I recall, some people speculate that, while it's a fictional tale, it's one based on the real life experience of either its author or someone he interviewed for the book.

I still remember two of the lines in it that, to a newbie trader like myself, struck me as being opposite to "common sense," They went something like this: "I did exactly the wrong thing. I sold my winning positions and held onto the losing ones." I gather he meant he went on to watch the positions he'd sold (for a small profit) keep climbing and the losing ones he held onto wallow or decline further. So he sold his winners out of fear they'd pull back and he held onto his losers hoping they'd recover. I wish I could say I learnt well from this lesson but, judging by the bad decisions I've made in the last six months of very heavy trading, I haven't.

The other line I remember went something like "A stock is never too high in price to buy nor too low in price to sell," Here I assume he means stocks showing a long term climbing trend vs those doing the opposite. I've yet to take this lesson to heart too. How many times have I stayed out of stocks that I thought wouldn't likely go higher, only to watch them do so? Or bottom fish for stocks I thought wouldn't go lower, only to watch them do so?

Like you Ares, I've yet to learn to control or ignore my emotions; my fears and hopes. I guess this is something all newbies have to get through or else throw in the towel - which is not something I'm willing to do.

Well that's enough for now. Thanks for telling me about this board. It seems a good place.

JELB