RED TO GREENS

       RED TO GREENS ARE ONE OF MY FAV SET UPS. PRIOR TO LEARNING AS MUCH AS I COULD ABOUT THEM I USED TO VIEW THEM AS ONLY TAKING PLACE ON IN PLAY STOCKS AND STOCKS THAT HAD ALREADY HAD THEIR DAY 1, SO IN OTHER WORDS, DAY 2 WOULD COME ALONG AND THE STOCK WOULD HAVE A WEAKER OPEN AND THE MOVE TO GREEN WOULD TAKE PLACE.

       I ALSO BELIEVED THAT THE STOCK WOULD SHOOT GREEN AND THEN FAIL AND IF YOU WERE STILL IN IT YOU WERE DOOMED TO CURSE THAT STOCK FOR THE REST OF YOUR LIFE. NOW I KNOW BETTER. R/G AS WE SHORTHANDERS WRITE IT IS SIMPLY A SET UP. IT DOESN’T HAVE TO OCCUR ON ANY PARTICULAR LOOK BUT IT DOES HELP IF THE STOCK IS IN AN UPREND AS THE PROBABILITY IS MORE IN YOUR FAVOR. WHEN PLANNING FOR A R/G SUPPORT AND RESISTANCE LEVELS ARE KEY AND EVEN MORE IMPORTANT THAN THE SET UP ITSELF. WHAT DO I MEAN BY THAT. IF A STOCK HAS STRONG DAY AND CLOSES NICELY. THE NEXT DAY YOU WOULD WANT CERTAIN LEVELS TO HOLD INTRADAY TO BE ABLE TO HAVE A VALID R/G TRADE. IF THOSE LEVELS BREAK AND YOUR STOCK OPENS UNDER THIS LEVEL NOW THE R/G PROBAILITY IS NOT QUITE AS HIGH. HOWEVER IF THIS AREA YOU DREW HOLDS YOU CAN ALMOST TAKE THE R/G TRADE ON THE FIRST CANDLE. I HOPE I MADE MYSELF CLEAR.

      IF YOU ARE NOT A QUICK EARLY MORNING RISK TAKER THAT IS OK TOO. ANOTHER WAY A R./G MOVE CAN BE TAKEN IS AS FOLLOWS: FIRST OFF THE DAILY LOOKS HOT, THAT IS ALWAYS KEY. SECOND , WHAT YOU WANT IS A STRONG OPEN AND HOLD OF LEVELS. YOU SEE A STRONG EARLY MORNING MOVE BUT THEN THE STOCK PULLS BACK A BIT AT RESISTANCE. YOU KNOW FROM YOUR STUDIES OF PRICE ACTION THAT THE PULLBACK IS WEAK SO YOU ARE WAITING FOR A HIGHER LOW PERHAPS EVEN A SLIGHTLY LOWER LOW BUT AFTER THIS YOU SEE ANOTHER PUSH UP WITH STRENGTH . THIS IS WHERE YOU GET IN. HERE ARE SOME EXAMPLES OF R/G MOVES THAT HAPPENED YESTERDAY. FOR THE PURPOSE OF THIS POST I WILL ONLY SHOW YOU THE INTRADAY CHART. 

       YOU CAN SEE HERE THAT IN ALL THESE CASES YOU HAD THE INITIAL PUSH BUT IF YOU WERENT QUICK ENOUGH OR WERE NOT AROUND AS LONG AS THE DAILY CHART HAD ROOM YOU COULD FEEL CONFIDENT IN TAKING THAT SECOND ENTRY. REMEMBER NOW,IF THIS WAS DAY 3 OR DAY 4 OR ON A SUPER EXTENDED DAILY YOUR BIAS FOR A R/G OR AT LEAST FOR AN ALL DAY TYPE OF MOVE WOULD BE OF LESSER STRENGTH. IN THAT CASE YOU WOULD BE QUICK WITH YOUR R/G MOVE OR YOU WOULD NOT TAKE IT AT ALL AND WAIT FOR THE SHORT AT SOME POINT IF IT WERE GIVEN. SO WHEN WOULD I LOOK FOR A R/G SET UP

1)      DAY TWO OF A MOVE THAT STILL HAS ROOM TO GO ON THE DAILY, RESISTANCE IS NOT TOO NEAR AND INTRADAY LOOK IS NOT TOO EXTENDED

2)      DAILY IN AN UPTREND BUT PULLED BACK, NEARING AREA OF SUPPORT , YOU NOW HAVE A CLEAR AREA OF SUPPORT AND ARE JUST WAITING FOR MAYBE A GAP DOWN TRICKING MANY SHORTS INTO THINKING ITS GOING DOWN BUT THE REALITY OF IT IS THE DAILY BIAS IS FOR A LONG, BUY THE PULLBACK. AND THE SET UP COULD BE A R/G

3)      A STOCK IN A DOWNTREND THAT HAD A STRONG BOUNCE AND INTRDAY IS SET UP FOR A R/G LOOK. DOESN’T MEAN THAT THE TREND HAS REVERSED BUT AT LEAST FOR THAT OPEN YOU MAY SEE A NICE R/G MOVE

KNOW YOUR LEVELS

Good evening guys. I am going to try my best to bring you a new blog entry at the very least 2-3 times per week. I would love the accomplish this both for myself and for the readers education. Teaching is one of the best ways to learn and I am still in a process of self mastery. I have a long way to go but hopefully this helps!

Today my post is about support and resistance. As a trader if there is one thing i could have told my younger self it would have been "spend most of your time studying support and resistance." This is truly the most important thing to me in a chart. Forget patterns forget indicators , yes these were aspects of the chart i used to focus on waaaay too much. Support and resistance will be the most beneficial thing to study. I call these LEVELS.These are the areas on a chart i call areas of interest. This is combination with a daily chart bias, a well set up plan for the day and observation of candle strength and volume will set you up for a higher probability of having a successful trade.  Lets take a look at the chart for FIT this Friday. First lets look at the daily.

Remember on Thursday when I was scanning for potential in play stocks for Friday what I saw was the powerful move on Wednesday and then the pullback on lower volume on Thursday. Looking at this chart i had an idea or a bias , that as long as we stayed above the emas 9 and 20 we could have a nice continuation long day on Friday. I had the idea for either a hold of support (which you will see later) or a gap up and go. In other words my bias was for a long based on the daily chart, Next I moved on to the intraday chart or 3 min chart in my case. I had my levels drawn which you will see. When when we opened on Friday morning you will see that the lower end of the levels were held, in other words , the support on the chart held , and aren't we taught to buy at support and sell at resistance ! well this is a perfect example. Support was held and a strong open set the tone for the day. If you were a risk taker or you were prepared you could take that long at the open, since support held nicely. If not another option was to wait for the lower volume pullback and then get in at the first sign of green. Remember since your bias was for a long you would have no hesitation getting into it on this pullback. 

If you took the entry long at the open or on a pullback you had a nice day. Based on your bias for the day you were handsomely rewarded with a nice trade. Levels are very important bc they not only help you know where to take the trade BUT they help you be disciplined. Just seeing those lines drawn visually will prevent you from taking impulse and undisciplined trades.

GNCA--WHAT ON EARTH IS YOUR BIAS?

Good Saturday everyone. I am here relaxing at home today flipping through some charts on finviz and I came upon a great trader on Friday. GNCA. I knew I had to write a blog on it. One of the big things I have been working on in my own trading is something called a bias. This is what I expect the stock to do the next day. So when I am writing my plan for the following morning I normally try to have 1-2 different scenarios as to what may happen. Sometimes it is fairly easy to call a bias on a chart. IE: r/g , g/r , failed follow through set up etc. Other times I have to stare at the chart and really think about it. Having loads of screen time is key to get better at developing your bias for a stock. At times though you come upon a stock that no matter how good or experienced you are it will be very similar flipping a coin. GNCA is that stock for today. I didnt trade it or have it on my watch list yesterday but I feel it will be a great lesson for many.  I will try to make a case for which bias was in fact the most probable but also make sure to bring up how even with the right bias you could have been in trouble if your entry wasn't correct.

To start off here is a look at GNCA after yesterdays action

Thursday what you would have seen on this chart is the big move from a low of 4.83 to a high of 8.07. This is near to a 100% mover if you caught it at the bottom. Not typical in big board stocks but it has happened plenty before. So you are running your scan Thursday night and you come upon this chart , it sets off an alert in your head. This is a good one!! How do you set your bias here?? Well usually when I see a powerful stock like this that had a strong first day I like it either for a red to green setup or If i believe it is already too extended I will like the over extended gap down set up. The next day it gapped down so both biases could actually take place. Lets look at the intraday chart now for Friday

You may look at this and say: "well of course it was a short , it moved a big amount % wise and was at its ma200" .Well thats all good and dandy but i have seen stocks like this keep on going , especially if they open red. Good point however and in this case you would have been right. So let me take you through the morning action. There was a gap down and the stock began to slightly base making a higher low at around 9:45, those looking for the r/g may have taken the long here and would have been in the green for a few minutes only to see their profits evaporate quickly. Funny enough, those who took the short here and held all day would have done fantastic ! Later on at around 10:50am there was another chance for those who called for a r/g set up. The move was a nicer one if you caught it early, but if you thought this was a home run trade you were very disappointed. The thing with overextended gap down plays and this is a very important point is that they typically TRY to go r./g sometimes they even push a bit higher than green and then fail. The goal with these trades is to have conviction. If your bias is that this will be an overextended gap down and you let it go near r/g or r/g you take your short you MUST hold it until it either takes out your stop or the day is coming to an end because the toughest of these plays WILL try and shake you out. Now , why would you have a stronger bias for a gap down short as opposed to a g/r play. Gather your points to support your bias. Over extended gap down :

1) stock moved up a huge % stock doubled in price!
2) was at ma200 on daily chart a strong resistance
3) intraday look was extended

So having these points in favor of the overextended gap down set up you could now prepare for this the next day. You could have seen a long entry for GNCA but you would not have taken it because your bias was strong and you had a plan. Let it try to go green and then short it and stay short till it cracks!  Hope you enjoyed this post