Today’s example of the pattern I’ve been talking about is from Ceradyne Inc. (Nasdaq: CRDN):

Of all the ones I’ve put up on my blog, I’ve unfortunately only spotted one of them in time to trade it. Primarily because I’ve been oversleeping the last few days (or, if you got mail from me at 4am, you know I actually underslept, then napped right through the open!). If people spot examples that didn’t work, I’d like to see them. It seems like a really solid pattern so far. Has a nice breakout when it breaks. I’m not sure if the 5ma (thick grey line) being so near is necessary or not, but I’ve noticed it’s almost always near when this pattern emerges, as well.

Stocks Mentioned In This Article
Stock	Links
CRDN	| |

No trades from Zoomie today. Apparently we are playing tag this week, and Zoomie will be making the trades tomorrow.

Today’s market environment was difficult, from my standpoint. I saw stocks like Medarex Inc. (Nasdaq: MEDX) and Apollo Group Inc. (Nasdaq: APOL) break out and then stall. Eventually some would fail, and some would succeed. For the second day in a row, of my approximately 169 watchlist stocks, Trade-Ideas told me only two had very high volume. Those were Express Scripts Inc (Nasdaq: ESRX) and D.R. Horton Inc (NYSE: DHI).

So, I mostly just sat and watched, until I decided nothing was happening and took a walk. This was about 2PM EST. It’s 74 degrees here, so my walk was very pleasant. When I got back at 3PM, the indices had all surged up, and more of my stocks were breaking out from tall candles. That type of trade is not for me, late in the day, but I was wishing I had waited just another half hour to leave my desk. I could have made some good money on the surge in stocks like Continental Airlines (NYSE: CAL) or BE Aerospace Inc (Nasdaq: BEAV).

But before all that, 20 minutes into the session, Ceradyne Inc (Nasdaq: CRDN) broke out of its target level of 53. The move was too fast for me to catch (in the time it took me to swivel my head and pull up the chart, it had moved 30 cents). But I watched it, and after it took a breather at the 53.25 area, I checked the TICK’s and bought in for a scalp. Less than a minute later, I sold at 53.49, for 0.92 R. A nice way to start my day, and unbeknownst to me at that point, finish it as well.

Shortly after that, it reversed and fell pretty hard. This made me hesitant to jump on stocks that broke out and stalled once we were past energy of the market open.

The chart (I accidently entered my closing trade time incorrectly, so imagine that exit line over on the same bar as the entry line…)

(I should point out that I was watching CRDN because it was featured in the excellent HighChartPatterns.com service’s newsletter.)

Stocks Mentioned In This Article
Stock	Links
MEDX	| |
APOL	| |
ESRX	| |
DHI	| |
CAL	| |
BEAV	| |
CRDN	| |

Early on, it looked like I might break through my undertrading barrier today. Several of my watchlist items were sending me alerts. But, as it turned out, most were not tradeable. Let’s see ‘em…

First, National Oilwell Varco Inc. (NYSE: NOV) gapped through my target of 64 on the open. If it were a small gap I’d consider my trading options, but it had gapped all the way to open at 65.50, and approached 68 within the first 20 minutes of trading. So, so much for NOV… I’m noting now that it closed at 64.20, so if it bounces off 64 tomorrow I may get in. Then again, it may be trying to close that gap…

Next, Ceradyne Inc. (Nasdaq: CRDN) tapped the highchartpatterns target of 50, but didn’t trade in a way that triggered the trade. It made a couple half-hearted tries to re-reach 50, but gave up by noon. So, again, close, but no cigar.

Next, Garmin Ltd. (Nasdaq: GRMN) fell through highchartpatterns target of 95, and triggered the trade. However, it fell so fast my order did not fill, and I’m convinced I would have been screwed on a market order in that action. So, I had to sit this one out. That’s a ten-minute candle, where it falls from 95.65 to 92.07 and climbs back to 94.12. That’s volatility!

Seeing that Akami Technologies, Inc. (Nasdaq: AKAM) gapping up, I changed my view of it from short to long, chosing an entry point above 37.40 based on the weekly charts. When I was out at lunch, I got the email that said it traded at my price. Man, I could not get a break! But, I checked with my blackberry a few minutes later, and saw that it had already fallen to 36.20 again. So there wasn’t even a trade to miss! What a frustrating day! But, I’ll note that it closed reasonably strong at 36.83, so any kind of healthy follow-through tomorrow has a chance to get me into the trade.

So, after I got back home from lunch I made one trade, in United States Steel Corporation (NYSE: X). I got 1.5R out of it. You can see my sloppily scratched blue lines marking my entry and exit.

Unlike yesterday’s 1R loss scenario, I tried to be very aware of whether I felt a need to take profits, or if I feld that the trade was turning against me. You can see that the exit candle closed near its high (I think these are called Doji’s when they close at their open prices, but I don’t believe in the named candle patterns intraday). So, when it was steadily climbing, I decided the stock could reverse. The markets where positive/negative/positive see-sawing in the afternoon. Eventually, you can see that the stock made lower lows by the close, but I would have stopped myself out at breakeven before that, in the candle after my actual exit. So, I am pleased with my choice.

I hope everyone had a good trading day!

On Pivots
After seeing a note yesterday on Trader-X’s blog, I was reminded that I have been meaning to see what pivot points can do in sideways markets. I had read about a pivot strategy for flat markets in a book a few months ago. So, last night and during today’s session, I kept the standard pivot points overlayed on my charts. At first glance, it does appear to be uncanny the way they line up with the actual price action. I know the formulas for the pivot levels, and I can’t think of any reason why they hold so well. One explanation, obviously, is that enough traders use those pivots to make them a self-fulfilling prophecy. Another explanation, is that my eyes are drawn to spots where the prices and the lines match, and I unconsciously ignore all the places where there is no correlation whatsoever. More investigation is needed.

Stocks Mentioned In This Article
Stock	Links
NOV	| |
CRDN	| |
GRMN	| |
AKAM	| |
X	| |