Going in with momentum

[Ares]

Currently, this is my ideal criteria but will be using other strategies too:

Stock below $10
Long term uptrend (a golden cross backed up by volume, or has T3ML)
Short term downtrend ( price trading below the 8 ma, or a Bull flag)
Price close to the lowest line of an uptrending linear regression.
RSI(2) crossing up from below 20
Stochastics crossing up from below 20 (signal)
MACD crossing up near zero level (confirmation)
MACD histogram starting to form a mountain (for momentum).
MACD uptrending to confirm strength of uptrend.

Active in premarket
price trading at least 25 cents from the open.
positive net price.
Bid refreshing with 100 shares.
time and sales being filled with green prints (better if it's green blocks)
nice level 2 set up (ask thicker than bid)
multiple time frames uptrending.
AX leaving the offer.

Will be watching for these resistances to be broken:

Previous 15 minute's high,15 minute 8 ma, Previous hour's high,hourly 8 ma
Previous day's high, Daily 8 ma,Previous week's high,and weekly 8 ma.

Even better if the Fair value,Overall market,Sector, Industry, and Leading stock are all positive too.

I'm looking forward to this thread being filled with charts,comments, strategies,and anything to do with upward momentum.

[Ares]

I will be keeping ABAT on my watch list becauseI like the chart so far.
My dilemma here is, if I wait for 25 cents above the open, I may end up getting in too late due to % gain (with the stock being below $3).
So far, RSI (2) is above 100.
I'm looking forward to the RSI(2) going below 20.
Hopefully, the price hasn't gone up that much by then.
Would buying weakness be a better strategy for this one?

Any suggestions on entry point is welcome

[ScottishTrader]

Hey Ares,

Your rules have to be more flexible than that.  Obviously a 25c gap is not going to work on a stock under $2.  My best advice is just look at the chart, and figure out where you want in and out.  As far as ABAT, looking at the chart, I would aim for an entry at 1.66 on a small pullback, with a first target of 1.84.  Aggressive stop at 1.6, conservative stop at 1.55.  With the aggressive stop that would give you 18c gain for a 6c risk which is prety good.

Don't forget that if a stock is in a strong uptrend, RSI (even just an RSI(2)) may not get close to 20 or 30, in fact it may stay up above 70 for some time, so is not the most reliable entry indicator.  Also, if you are looking for momentum short term strategies, use a time frame that suits your strategy for entries and exits.  If you are daytrading use 1 min/5 min charts.  swing trading, 15 min/30 min charts.  Position trading, hourly/daily charts.  Switch back and forth to see whether your analysis on one timeframe matches your analysis on another.

[ScottishTrader]

here's one I am looking at for today (although I alrady have a position, I'm looking to add).  SUF has been forming a cup & handle since the end of March.  The handle broke out yesterday and the stock closed right at 4.17 resistance.  Technically a break above this resistance level would put a target of $5.07 IN PLAY.

I'd be looking for an entry on strength above 4.20 early (if it gaps up be careful, and wait for the pullback), with an agressive stop at 4.04.  A more conservative stop (as this could get hit on a pullback) would be 3.96.  I'd put my 1st target at (or just slightly under) 4.70, looking for the rest to make that 5.07 target.  Risk on the trade is about .16 with a .50 reward, with possibly more, so again, not bad.

[Ares]

Hi Scottish Trader,
Thank you so much for replying right away.
Your post is exactly the kind I'm looking for.
Very informative.
I'll give you an applaud for being the first one to respond and give an informative post.
As you may know already, I'm back to paper trading (after I lost money by not following my previous rules).
Recently, we funded our account, and we could be "hot" anytime.
We're considering to enter ABAT for real,but still holding back.
My entry would have been at 1.21 at the time I looked at it (exactly where the daily pullback was).
My support line was at 1.19/1.20. The entry would have been at 1.21 since 1.20 is a round number.

Regarding timeframes.
I usually use 60,15,5, and 1 minute time frames.
When all these timeframes are pointing up combined with a nice level 2 set up followed by green prints on the time and sales, I would usually place a bid just above the previous high,just above the suspected AX, or force entry at the ask.

When the momentum fades, I would usually initiate and exit, wait for the stock to tank, and enter near the 200ma of the hourly chart (with a horizontal support,downtrend,or uptrend line backing it up would be better) combined with a 1 minute chart for a momentum low entry.

Looking forward for more comments from you.
Thanx again.

Ares

[Ares]

Hi Scottish Trader,

SUF looking good so far.

12:05ET
I will be watching the hourly chart for entry.
Just a heads up, SUF is currently near the top linear regression line with RSI(2) above 80)

12:17ET
previous hour's high = 4.55
previous hour's low =  4.36 (swing low?)
multiple timeframes currently pointing up.
Will time and sales be filled with green prints soon?

[Ares]

TSCM currently trading at least 25 cents above the open.
Watching if this breaks 11.84 (previous week's high on my chart)
12:07ET
Weekly 8ma is currently at 11.71
So far:
at least 25 cents above the open
positive net price
broke yesterday's high of 11.62 (still below daily 8 ma which is currently at 11.81)
Linear regression currently at the lowest line
RSI(2) crossing up from below 20
Stochastics below 20
A bounce from the 50ma with the pullback line meeting together.
Does X mark the spot?
MACD has not cross up yet for swing confirmation though.

[ScottishTrader]

cheers ares,

suf is looking good, volume just came back in in the lat 15 minutes, we could get some continuation here.  But I wouldn't recommend a buy now.  I think that has to be part of the trading discipline: make your plan take your entry, and if you miss it, let it go.  with an entry in SUF at 4.50-55, the risk:reward is way out of whack (esp for a short term play) - you could put a stop in at 4.12, or a more aggressive one at 4.28, but it still exposes you to a fair amount of risk.

[Ares]

Hi Scottish trader,

This is how I see SUF right now on the hourly chart:

High = 4.56
Support = 4.05
Previous hour's high = 4.54
previous hour's low = 4.39 (a higher low)
200ma  currently at 3.82 (near the 3.84 support)

Going in with momentum would be a break of the previous hour's high above the 8 ma with green at the time and sales.

Otherwise, I would enter using a momentum low entry close to the 200ma (200 ma may rise to 4.05 by then.)

This is how I see ABAT:

It looks like it's heading for the 1.50 open/close pinch showing both in the weekly and hourly chart.
hourly 200 ma = 1.40
Daily and weekly swing low = 1.20
Daily 200ma = 0.85
Weekly 200ma = 0.65

[Ares]

Hi Scottish Trader,

Good trading on SUF.

You had a better entry at 4.20 compare to my entry of 4.50(high of previous hour after it made a higher high)
I would have gotten out at 4.72 when the minute chart opened and closed below its 8 ma for a profit of 0.22 cents = $220 on  1000 shares.
I wonder where this would stop out if I hanged on until the price opened and closed below the 8ma of the 15 minute chart.

13:32 ( Friday, April 13, 2007)
SUF opened and closed below the 15 minute 8ma.
Out at 4.89 for a profit of $390.

Keep on trading well.

I'm learning from you. Thanx.

Ares

[ScottishTrader]

Hey no problem,

I know you are just paper trading for now, but I commend you for that.  I never did and saw my port halve in my first year.  If you are willing to develop a strategy and follow it, I'm sure you will be successful.

I generally trade on slightly longer timescales than you (I don't have enough cash for a daytrading account), and I would recommend thinking about holding momentum for more than a day, unless you really see things tail off.  A bit of patience can result in much better returns 

As for SUF, we closed bang on resistance today but were strong into the close, so I would expect we may see further gains tomorrow.  Volume was solid today, and we broke through key resistance at 4.20.  A stop on your position just below 4.40 would seem reasonable to me, and let the profits run a little further.  I think we should see $5 either tomorrow or early next week.  But I'll be updating the SUF thread on that one

Cheers,

ST

[Ares]

Hi ST,

Before I forget, thanks for your comment on the exit strategy thread.

While I was at work today driving the bus, I can't help but think and admire your entry and exit targets.
High and low of day was close to 4.20 and 4.70 (price hovered here).

Looking at the RSI(2) on the chart, you are right, it's been above the 70 level and the price still kept on going up.
I see a W bottom with the first momentum low having bigger volume than the second momentum low.
It looks like SUF will be heading higher tommorow and may be using 4.70 as support now.

The reason I wait for the stock to trade at least 25 cents above the open, is to see that there is movement,range, and the uptrend is already in place for a day trade to limit risk by not holding overnight (potential gap downs, stock being halted,etc.)

Regarding SUF though, it was looking good to be held overnight (may even gap up tommorow).

What I want to know is, how did you know that SUF was going to move today?
What indicator did you use?
Were you planning to daytrade some or are all those targets for a longer term trade?

I'm looking forward to learning more from you.

I may even trade the stocks you're trading with real money in the future.

I really want to get back in the stock market right now but still saving up some money to risk.
We've funded our trading account recently with little money (so far, just $2,000).
I'd like to see around $5,000 set aside to be able to get in and out faster.

The main reason I went back to paper trading is because the previous play money we have is still stuck with GNBT (1,000 shares at 3.13) and GNTA (1,000 shares at 2.25).
Those trades were meant to be for daytrading - I ended up being a bagholder by not following my own rules (I was making money when I followed those rules daytrading GNBT from 0.80 upwards and made money with other stocks as well).

Our mentality at the time was, if we lose the play money (which I hope we will recover one day), it will be considered as a tuition fee for learning the stock market.


It's kind of hard setting aside play money when  only 1 person is  working  having
1 wife  and 3 kids.

Some members may be wondering why I'm spending so much time here at the 3SOF website reading and posting early in the morning and late at night.

Even though I'm just paper trading, I set my mind as if it's real money that I'm using.
I wake up early in the morning (6:00am) to paper trade in real time.
I'm using the time that I have to learn as much as I can to make money in the stock market while saving up, because I have a dream.

My short term goal is to be able to make money in the stock market so that I can take my family on holidays.

My second child is already 7 years old and he has not been to disneyland yet.

This is the price we have to pay for deciding my wife to stay home and give quality care to the kids.
The plan was for me to earn extra money on overtime for her to play in the stock market and make it her full time work.

I'm really thankful to David and Frederick for creating this 3SOF website.
A lot of very good information are in here.
3SOF gave me the opportunity to learn a lot from other experienced traders.
It also gave me the opportunity to share and test my ideas and strategies where knowledgeable traders (like you - Scottish Trader and others) confirm, disagree, or give suggestions while I'm paper trading.

Looking forward to make use of this continually learning experience in the near future and more comments from people like you.

Thanx again ST,


Ares

[ScottishTrader]

Hey Ares,

Really nice to read your thoughts, and motivations on trading, and thank you for the kind words.  A couple of points of advice.  If you only have a few thousand $ to trade with, an aggressive daytrading strategy may not be your best bet.  First and foremost because you will get creamed on trading fees (I have learned this by hard experience).  Second, it is much harder to successfully daytrade with a small amount of capital than it is to position trade or swing trade.  It becomes far too easy to get shaken out, as you never have any confidence or belief that any particular move is "for real", and you are always sweating that at any moment it will turn on you.  This results in a "glued to the screen" mentality, where you end up sweating every tick.  Been there done that (still am a lot of the time), and its not fun. 

Having such a small amount of capital puts you in a tricky situation.  It means you can really only play one (or at most 2) stocks at a time, so your decisions on which stocks to play have to be well thought through.  Also, going for stocks under $2 can be very risky, as often your "reasonable stop results in a 10% loss or more, and as we discussed before, on stocks like these, waiting until it goes up .25 is only going to lead you to trouble.  As stocks under $2 that goes up .25 in a day (remember that's a 12-15% gain, minimum) will likely givve most of that back by day's end, unless it is really on fire.  I would suggest changing that value to a percentage value for each stock you looks at (say, up 2.5% on solid early volume).  For these kinds of stocks (in fact any really), the best way to trade short term swing setups is to look for key points of support and resistance within trading ranges, and for breakouts of trading ranges (keep an eye out for nice patterns like ascending/symmetric triangles etc.  And try not to overtrade (one of my worst downfalls) - buying gaps up, jumping into stocks that look like they have momo (they always seem to reverse just after you have jumped in, at least in my experience).  If you have limited capital, you also have the opportunity to be a little patient and pick chart setups and entries where the trade puts you in a good risk:reward scenario. 

Also, find a good broker with really cheap trading fees.  I use Interactive Brokers (though I think they generally like you to have at least $10k, and you have to tell them you are an "experienced trader").  They only charge per trade $1 for up to 200 shares, and then .50 for every 100 shares above that.  It means fees on small positions (a few hundred shares) are minimal.

Finally, you have to accept that the reality of turning $2k into $10k say, in a short amount of time, while possible, is incredibly difficult, and is performance far beyond what almost every trader out there achieves.  It is possible if you were incredibly good at nailing quick 10% swings, but you would have to make 16 10% swing trades back to back to get to that kind of target, on all your money, without any losses.

As for SUF, although I didn't expect such a strong move yesterday, it was pretty straightforward, as I have been holding the stock for about 2 weeks, so have been following it pretty closely (both on daily and intraday charts).  Have a look at the SUF thread to see my analysis there.  What we had was a double bottom and then an uptrend, developing into short term cup & handle formation on the 30 min chart with key resistance at 4.17-4.20.  The daily chart confirmed this as important resistance, so I was looking for a break above there.  We had already had a few days of consolidation below here, and the price action was holding pretty steady between 3.80 and 4.10.  Wednesday's close broke out of the handle, leading me to think "its ready to go" so I was ready yesterday morning to add to my position when it broke out.  As for the target, I didn't expect it to make my first target in just 1 trading day, but the spike high from the last rally was obvious potential resistance.  My second target, (5.07, I think) is the techical target of the cup& handle brekaout, a measured move off the rim of the cup (though haveing read about C&H patterns some more, I may need to revise that down slightly - I think it should be a measured move off the break of the handle).  Finally, there is the 7.09 target off the double bottom, which is not yet in play.

Anyway, I have to go right now, but these are all just thoughts, trader to trader, and I'm happy to discuss things more with you, any time 

Cheers,
ST

[Ares]

DYAX is moving.
Would have taken a position of 500 shares at 6.20 because:
It was active in the pre market
broke the previous hour's high of 6.30
placed a bid at the previous 15 minute high of 6.20
watching the6.50 resistance
just broke through it
watching the 7.00 resistance.
just made a higher high above the 6.75(previous 15 minute resistance.)
getting close to the 7.00 resistance but there is still a nice level 2 set up in place
using the 1 minute chart, I would be out at 6.70 because it stalled below the 8 ma when it made a higher high (after it opened and closed below the 1 minute 8ma)
Using the 15 minute 8ma, I would still be in.
10:20ET
Watching 6.61(previos 15 minute high) if adding to position.
If it doesn't do its thing and opens and closes below the 8ma of the 15 minute chart, I would initiate and exit, wait for it to tank, and buy close to the hourly 200ma.
The charts I will be using for that will be the Hourly chart with the 1 minute chart.
I will be wating for a momentum low entry close to the 200 ma of the hourly chart confirmed by the 1 minute chart.
10:26ET
It made a lower low instead.
However, so far, volume is decreasing while price is decreasing in the 15 minute chart which is supposed to be bullish.
10:38ET
I drew a line connecting the swing highs of the 15 minute chart and drew a line connecting the lows.
So far,price opened below the 8 ma but it looks like 6.26 is sitting right on the lower line of an uptrend channel of the 15 minute chart.
If I charted this properly, this stock should go above $7.
5 more minutes to go before this candle closes (made a lower low on smaller volume)
Current high and low of candle is:
high = 6.40
low = 6.26
Looking at 6.40 as resistance to be broken on increasing volume.
candle opened and closed below the 8ma and broke the channel.
11:05ET
previous 15 minute low = 6.03
previous 15 minute high = 6.25
Is this going on cosnsolidation?
or will 6.49 be the right shoulder of a head and shoulder pattern?
11:16ET
8 ma currently at 6.39
would have gotten out at 6.20 at even with a loss on commissions using the 15 minute 8ma exit

April 16, 2007
Looking at recent history:
1) I should have locked profits when price was getting close to resistnace.
2) The 1 minute chart gave me abetter exit than the 15 minute.
3) The 10 cent trailing protective/trailing stop may have been better.

[Ares]

Hi ST,

Thanks for your advice.

My wife and I are seriously considering to just follow the stocks at the premium service for our real money since we have just a  small capital for now.
The idea in there just makes so much sense backed up by the performance of the portfolio.
For now, I'll continue to paper trade my daytrading strategies.
Will be looking forward to many more comments from you and anyone else that would like to help me out sharpen my daytrading skills.

Ares