By Cliff Clark
*** Reposting... we briefly mentioned looking to lower time frames yesterday in some of the review comments. Reposting this as a reminder. It doesn't just apply to swing trading.
I know most of the folks in the trading room are intra-day traders but at some point everybody should be adding some swing trading into the mix. I'd like to talk a little bit about something a mentor taught me years ago about avoiding false breakouts.
We always talk about looking to our left before we take any patterns to avoid running into any resistance, but does it ever make sense to look to the right? Yes, it does. Suppose I find a beautiful swing trade. A potential breakout to a new all time high. Obviously there is going to be no resistance to the left. But what about looking the right, since we are at an all time high should we look?
Well lets take a look at the 60 minute chart to see what we can find. Now suppose the 60 is up 9 bars in a row, or even 5 bars, would this be a great time to take that breakout on the daily? I don't think so. I think it would be far better to wait for a 60 minute pull back. Sure the stock may take off without us and we may even have to buy in at a higher level but I think in the long run we'll fair far better off waiting for the pullback.
In my opinion looking to the left is very important but looking to the right can be just as valuable sometimes too!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
