The best online trading entries come when you can combine a setup within a setup. Of course, I’m always trying to find daily charts that have some type of trading setup, and look at smaller time frames of five and fifteen minute charts for entry.
Here’s a great example of using what I call the BL1 trading pattern on the daily chart, with a pullback entry on the 5-minute chart. CTDC – China Technology Development Group Corp. gapped higher after closing at the low the day before. Bears are caught short, and bulls are discouraged if they’re not holding. The stock opens higher than the previous candlestick. Bears need to cover, and buls are anxious to find an entry.
The stock pulled back six candlesticks. First entry comes on the higher high of the seventh candlestick. This gives a very nice reward to risk. Risk is less than .30 or 1R. Now you have a choice. Plan to sell in partials, or in a market such as we’re in… where stocks are easily following through, you can add to entries on each new trigger buy.
You could add at the second entry point, or even the 3rd entry over the 5-minute high. Never add to losers, but there’s nothing wrong with adding to a winner. Just tighten your stops, and never turn the winner into a loss. I wouldn’t try this if you’re not consistent with initial entries, but it’s an option that compounds gains quickly when used with the best setups and market conditions. Because I know the strength of the BL1 trading pattern, I would be adding to the initial position.
Last weeks IPO STV, made it’s move today.
RCH is making it’s first pullback. Watch for an entry.
VLO stalled on it’s trendline.
Homebuilders are still in a funk. MTH stalled at it’s 50dma. I’m watching for entry over that indicator.
