SPY, ABX

There were a lot of short setups today. I had trades in AEM, FWLT, SPY, ABX.

SPY was resistance setup and worked like a charm. Gap down, followed by strong up action, meets EMA resistance and continues the trend downward.

5 min. chart of the resistance setup.

ABX was extended on the day and had gapped up. Wait for a nice entry. 8th bar strong and part of consolidation. 9th bar red doji after a consolidation. First sign to be alert. 10th bar almost an inside bar closing very weak. Time to get short. Covered entire position at 20 EMA.

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.

GS, ACI

Entered short on the break of 5th bar low which was an inside NR5.


Gap up and immediate sell-off in the first bar followed by sideway consolidation in the lower part of the first bar. 6th bar is an inside NR5. Entered short on the break of the 6th bar low. Took partial at R1 and got stopped out at BE on the remaining.

Inverted Cup & Handle - AGU

Series of NR7 at whole round number - SPY

SPY formed a series of NR7 at $110 level. Shorted on the break of the NRB consolidation. Partial at ORH where it formed a doji and remaining near the 5 day (orange) EMA.

MOS had a nice entry on the break of 'h' shaped pattern.

AGMN

Entered long based on 15 min. Market was weak and AMGN formed a hanging man like candle, tried to move up but took out the low of the HM. Exited full position there.

Entered short on tailed inside red on red bar. Took partial when it formed an inside NR7. Exited full position when it formed 2 inside bars.


Was expecting some weakness in SPY today. Little sell-off right after the open, found support on 50 EMA. Rallied on nice volume but then formed a lower high. I entered a bit late in the trade. My exit was horrible even though as I said, I was expecting some weakness. First exit near PDL where it formed a base. 2nd exit was also near the same level.

Had a losing trade in AIG.

QGEN, NYX

NR5. Looked like a bullish flag initially but failed. Entered on the break. Easy ride to 20 EMA.


Entered on the break of 2nd candle which was a tailed inside red on red bar. Watch carefully for 50 EMA support. Added again. Exited at $27.

Bull Flag - SPY; Gap Fill - CTRP

SPY gapped up on good earnings and guidance from INTC yesterday after the close. It formed a bull flag reaching the upward 5 EMA. Took partial at morning high and sold remaining near the close.


Gapped up forming a spinning top followed by a NRIB. Entered short on the 3rd bar. I did not wait for it to close below 5 EMA. After the entry it consolidated sideways and went down slowly to fill the gap.

Had 2 losers today - FCX and one other from the scan.

WLT

Did not take advantage of such a nice trading day. Had 2 1/2 losers. ABX - entered on retest of ORH. It gave 1R+ and then came back against me. This was my fault for letting this one turn into a loser. FCX and BTU were losers. I was long both when the market reversed. Only savior was WLT.


Entered short on the break of 2nd bar low. SPY was strong today along with most of the stocks on my watchlist. 4th, 5th candles looked strong and I was sure that my SL will be taken out. Moved my SL above 3rd bar high. Took partial at 20 EMA & R1 where it found some support and bounced back on very low volume. Added back to my position and exited at daily pivot.


Gapped up, strong first bar followed by a slight retracement to the 5 EMA. Entered on the break of inside bar. Partialed near morning swing high, sold remaining at the end of the day around that level.

FCX, NUE

**Edited: The chart should read 'Bearish Engulfing' and not bullish engulfing. 

NUE was from the scanner.  8th candle was a bearish engulfing candle on high volume. Entered short on the break of the 7th bar low. Price dropped a little and then consolildated for another leg down.  I was watching how the price would react at 20 EMA. There was no bounce at 20EMA and so I set my target PDH. Markets were weak and that also helped to reach the target smoothly.


FCX was weak and the first 3 candles saw selling followed by some retracement on low volume. It formed a red hanging man followed by a weak inside bar. The entry was the handle of C&H. Covered entire position at 50% FE of C&H.  Left a lot on the table but I sticked to my plan. 

FCX

I liked this trade not because it gave me above 2R but because I waited for the right time to short. Price moved down and bounced off from 20 EMA forming a hammer. Shorted a little below the low of the 6th hammer candle. SL was just a few pennies above the high of the 6th hammer candle. Target was 50EMA of 10 min. chart where price normally seems to bounce.  Exited completely at 10 min. 50 EMA.

AEM

AEM was unable to break the PDH in the morning. 2nd bar was a red inside bar. By the time I saw this, it had already taken out the lows of the 2nd bar. I still entered AEM. I normally have a 50% FE target which also happened to be the daily pivot, 50 EMA. But today I had to set the target of 100% FE. AEM bounced off strongly from the 50 EMA and I exited my full position at almost BE. It feels bad to give away your full profit. I should stick with my trading plan. But the good thing is that, if I had set my normal target, it would have reached it.

SRS

Jimhas been trading SRS quite often lately. So I added SRS to my watchlist again. After 3 down days, I was expecting some bounce in the market. SRS 6/15 candle was almost an inside bar and met all my counter trend requirements. Shorted on the break of 6th bar low. Treated it as an inverted C&H to set the target. Target was 50% FE of the pattern. Since SRS has a strong affinity to it's PDH/PDL, I was expecting it to touch the PDL but decided to exit completely at 50% FE.

GG

GG gapped down like most other gold stocks on my WL but was strong from the start. At around noon, it formed a lower high and an inside bar within the tail of the previous candle. Both the candles were red. Shorted on the break of the low of inside bar. target was $33.50 (daily pivot) which GG managed to reach. 12/15 candle was a nice hammer and made me a bit nervous but the high of the hammer was not taken out. I left a lot on the table, GG is continuing to drop as I write this post.