TZA short, POT long

Simple bear flag formation. Short on the break of 3rd candle low.




I Like red, green, red bar for a short when the low is taken out but instead if it takes out the high, worth going long. TZA had the same pattern on 12/13. Pot had the same pattern on daily but today price took out high instead of taking out the long. I entered long just below PDH.

Cup & Handle - POT

POT gapped up. Strong bars which then consolidated sideways forming a cup and handle. NRIB NR7 withing the consolidation was a perfect entry. Partialled at 50% FE measure from ORL to the top of the consolidation. Price usually consolidates near the 50% extension. Gave some time for consolidation and sold remaining when it formed bearish red candles. Also went short here covered near the EOD.

This was the first trade of the day. Short below PDL based on the daily. First bar wide red bar followed by an inside bar. 3rd bar was a strong reversal green bar. Out at BE. I should have taken some profit near $132 level. Went long above the 3rd bar high and sold just below 5 DMA.

Short: SPY

Started the day with longs in ACI and LVS. Closed both for small losses. The only trade that worked was SPY short.


SPY gapped up and hit the high made on 10/25 which acted as a strong resistance. Initially it looked like a retracement to 5 EMA but price tumbled. Took partial at R2, next at R1 and let the remaining run which was covered near $118.00

FFIV, SPG

FFIV was a reversal trade based on daily.

Sept. 21: SLW, AMZN short

2nd is an inside bar closing weak and just below PDL. Short on the break of ORL. Covered partial at S2 and the remaining near $24 mark.

AMZN has had a nice run the past few days. It just needs to rest a little before it move up further. Started to scale in on the spinning top and added to the position on the break of the trendline. Covered near the $150 mark which also happened to be the daily pivot.

SPY Reversal

I want to quickly refer you to Jamie's trade in this post. As it is seen on the 5min. chart, price unable to hold the close above $119, moves back to EMA support and consolidates before price breaks down 20 & 50 EMA on high volume. It then forms a flag at the same area where SPY found support in the morning session.

I used the 15 min. for my entry and stayed in the trade on seeing the bull flag on the 5 min.

Cradle Trade - SPY

Corey of Afraidtotrade.com often mentions about cradle trade on his blog. This is a trend reversal setup and a must to have in your trading arsenal. The name of this setup was coined by Corey. Below is the Cradle definition from his presentation. The same applies for a bullish setup with prices breaking above 20 & 50 EMA.

Setup based on 5 min. chart.

• Uses a 20 and 50 Exponential MA
• Price breaks below 20 & 50 EMA,
  the EMAs Cross “bearishly,” then price “pulls back” to the confluence
• Place Stop above EMA Confluence Zone
• Target a Trend Reversal/Retest of Lows
• Volume increase on break of major EMA's and volume contraction during the pull back to the confluence (Added)
  
  

The Best Cradles…

• Form after a Lengthy Up/Downtrend
• Are Confirmed by Basic Candles (bearish in this case - added)
• Are Preceded by Divergences or
  “Three Push” Patterns

Read about Cradle trade here

Corey: "I'll be more confident if there's a candle pattern such as a doji or an evening star as price finds resistance at the cradle."

SPY looked strong in the morning after the consumer confidence report. Price reached PDH retraced a little and hit PDH again. This time it formed a nice bearish engulfing candle. Price then moves below major EMA's (yellow = 20 EMA, gray = 50 EMA) on high volume. Price then pulls back on low volume at the confluence of the bearish EMA cross (20 EMA moves below 50 EMA) and form a doji. Corey calls this cradle doji. Next candle closes very weak. Entered short there. Price then breaks on high volume reaching the morning lows.

Almost similar setup trade taken by Jamie in Dec. He explained it beautifully how to trade this setup. Notice that in this trade, the entry is above 50 EMA. Below is copy-paste of Jamie's chart and his explanation of the trade.

"A good way to anticipate a reversal is to monitor the strength of the move back to the base of support. Friday's early euphoria on strong jobs data didn't last due to the strength of the $USD and its effect on commodities. Initially price pulls back on lighter volume, but once the 20 EMA gives way, volume on the downside accelerates forming a flag pole into support. Flags form on declining volume and once they break, volume accelerates all the way back down to pre-market levels and culminates in a mini-capitulation."

Burn the setups to memory. The reward-risk ratio is very nice.

SRS - 1 min

Dummy Gapper Trade - Whole Foods Market, Inc. (Public, NASDAQ:WFMI)

WFMI gapped down on earnings. The 10.45 candlestick on the 15 min chart appeared as if WFMI would base near the ORL for a breakout to the downside. But the 11 am candle was a doji, a potential for reversal. The next green candle confirmed it. I switched to 1 min. chart if I could find a possible low risk entry. It was forming NRB's (as shown in the blue area on the 1 min. chart). Entered at the break of the base. I decided to let this trade run and decided to take profits when the candle closed below the 5 EMA on the 15 min. chart. Finally closed my position at the decade figure of $20.