Wednesday, January 06, 2010

Bread and Butter Daytrade Set-Up

AONE has a daily spot at 23.5 -- stock spiked up away from base, came close to resistance, and reversed. As you know, we never buy on top of an extended spike so we waited for a pull-back/good entry. We found one on the test of P/20 EMA (on 5 min chart). We bought the bounce on that test with average 22.6 entry.

Our initial stop was 22.4 (low of that test).

Stock rides up on the 20 EMA but needs to break above that R1 wall at 22.8 with a volume spike. The longer it takes the higher the chance of failure as the EMA flattens out.

EMA was tested but candle closed above -- that low became the new stop around 22.6.

Stop keeps moving up with the EMA -- now a risk free trade since stop is over the 22.6 entry. Stock pops over 22.8 and takes out R1.

Stock takes out R1 but reverses and with that we take off half the position for just over a dime as we are thinking it will fail.

AONE is a momo stock and this kind of action just doesn't make us feel bullish. We exited the rest of the position on yet another test of the EMA. If stock reverses this afternoon over 22.8/22.9 with huge volume burst we'd probably try again.

We made nothing basically in this trade but it's a great example of how we day-trade, day in, day out. Our whole trading strategy is based on the confluence of daily spots and intraday set-ups. This set-up was a very typical one that we do almost on a daily basis (it usually works, really). We've shown a lot of winning trades over the last little while and it only seemed fair to discuss a no-go.