Mapping the Markets: Trading Lessons and S&P Analysis
The nature of a healthy market is to exhale and inhale.
In the nightly portion of the Daily Market Report on Monday, October 10th, I used the following day trade ideas:
Citrix Systems (CTXS): Long
Vistaprint (VPRT): Long
Questcor Pharmaceuticals (QCOR): Long
V.F. Corporation (VFC): Long
First Solar (FSLR): Short
Then yesterday, prior to the open, I sent an alert to keep Universal Display (PANL) on the radar as a long.
VFC and QCOR did not trigger as they did not exceed our entry price.
Let's walk through the other names to see how they work out, applying my Opening Range Breakout Method as well.
The entry for CTXS was 58.15 and we were triggered long just after the open. Note the opening pullback and typical bleedback into the prior day's range to Monday's late pivot (B) followed by an opening range breakout (ORB).
Simply put, an ORB is a breakout in either direction from the first 30 minute range. In other words, once the first 30 minute range is traced out, you want to bracket that price range with a move through the upside of that initial range triggering an upside ORB, as well as a move to the downside of that initial range triggering a downside ORB.
ORB's do a good job of identifying Trend Days, to the topside and downside.
Note that after CTXS triggered us long, an ORB (point C) on the chart telegraphed a Trend Day and higher prices.
VPRT was a long with a 30.50 entry and we were triggered long within the first 10 minutes.
Note the first pullback in the spirit of a 1 2 3 Pullback on the 10 minute chart following the opening surge and how once again an ORB (point C) telegraphed a Trend Day and higher prices.
Putting the pieces together, note how the ORB coincided with a breakout of a Cup & Handle pattern on the 10 minute chart.
FSLR was our only short pick for Tuesday, October 11th.
Our short entry was 57.95 and we were triggered short just after the open with FSLR extending quickly for a nice Hit & Run trade. Stocks that spike significantly up or down from the open often times score first hour highs or lows, so my inclination is to sell/cover on first hour spike highs or lows. The nature of price action is to expand and contract so often times, following these opening surges, there is a contraction/consolidation in price that offers another opportunity/setup.
In the case of FSLR on Tuesday, note that an ORB elicited an extension lower that was followed by Train Tracks on the 10 minute chart which led to a stab back up through the level of the ORB.
Trade back up through (or back down through) an ORB is what I refer to as an ORB Reversal.
While sometimes an ORB Reversal can lead to a reversal on the day, in the case of FSLR, it led to a meager retracement. The important thing to note is that when the original opening range breakdown was reconfirmed mid-day, it offered another short sale opportunity.
As mentioned above, prior to the open on Tuesday, we sent an alert to keep PANL on the radar as a long trade.
PANL did not participate in Monday's strong market day, but had traced out a daily Plus One/Minus Two Buy setup going into Monday's close. Why? The Three Day Chart was pointing up, satisfying the Plus One part of the equation, and PANL had subsequently traced out two consecutive lower daily lows, satisfying the Minus Two part of the equation. Moreover, the setup was occurring from a test of the important 50 day moving average and near the level of a 50% retracement of the entire August to September range.
Click to enlarge
On Tuesday morning, PANL exploded over the prior day's 'Slim Jim' tight consolidation which had left an N/R 7 Day (the narrowest range in 7 trading days which often indicates an expansion of volatility in the next day or so). PANL is a great example of the concept of the nature of price action to contract and expand.
Note how an ORB (trade above the high of the third 10 minute bar) in PANL on Tuesday telegraphed higher prices. Note also how PANL held firm after the first hour indication potentially higher prices and how an outside up bar on the 10 min chart following a little shakeout let to a climax 3 bar run into the high of the day near the overhead 20 day moving average. We sent out an alert to sell the balance of the position as PANL approached 50.
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