Following Institutional Footprints

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Marian Blair
5 years ago
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Strategies Following Institutional Footprints Trading Expansions of Range and Volume Equity market cycles provide opportunity in every phase of liquidity.

1 Strategies Following Institutional Footprints Trading Expansions of Range and Volume Equity market cycles provide opportunity in every phase of liquidity. The greatest possibilities are evident when expansion-of-range-and-volume (XRV) price activity propels a stock rapidly higher or lower. XRV moves occur when institutions have directed their traders to buy or liquidate large equity positions. The stock in trade overwhelms supply or demand, pushing price in a rapid directional move higher (in the case of buying), or lower (in the case of selling). The resulting XRV chart pattern affords traders the opportunity to capitalize on institutional activity, which tends to continue over the course of several trading sessions.» Identifying Expansion-of-Range-and-Volume (XRV) Setups and are most frequently placed at daily resistance (for The ability to spot institutional activity has made the long trades), or support (for shorts). There are two XRV the cornerstone of the author s trading business types of XRV chart pattern and the Type 1 setup is for 16 years. It is easy to find on daily price charts, and discussed first. intraday price support and resistance zones make risk control very intuitive. Stop losses are placed outside XRV Pattern Type One of clearly-identifiable setup-day 5-minute intraday The first XRV chart pattern occurs when a trending move support or resistance. The targets are also easy to spot, pulls back, then breaks out in the direction of the trend. 52

Strategies The rules for a type 1 long entry are F1) XRV Pattern 1 Setup Pullback in Grupo Televisa (TV) as follows: 1. A stock is trending higher and pulls back. 2.

2 Strategies The rules for a type 1 long entry are F1) XRV Pattern 1 Setup Pullback in Grupo Televisa (TV) as follows: 1. A stock is trending higher and pulls back. 2. A breakout of the pullback occurs on the widest range of the past ten sessions, preferably on heavy volume. 3. The buy entry is the following session, $0.10 above the XRV bar in the direction of the breakout. 4. Close out at the end of day, or at the overhead daily resistance target, or on a trigger of a protective stop. The rules for a short sale are as follows: 1. A stock that is trending lower pulls back. In this example, a trending move lower has pulled back toward the overhead trend line. A series of higher lows are followed by a reversal lower, violating the deepest bar of the pullback. The XRV daily bar has the widest range of the past ten sessions, and has significant volume. Since the original trend was downward, and the XRV bar also had a downward thrust, the day-trade entry the following session will be 0.10 below the low of the XRV daily bar. As long as the reward-to-risk ratio for the potential position is greater than 1:1, the trade will be an entry candidate on the trading plan for the following session. 53

3 Strategies F2) XRV Trade Day in Grupo Televisa (TV) 3. The short-sale entry is the following session, $0.10 below the XRV bar in the direction of the breakout. 4. Close out at the end of day, or at the underlying daily support target, or on a trigger of a protective stop. An example of a short-sale setup is provided in a recent move in Grupo Televisa (TV), in Figure 1. Based on the price movement in Figure 1, the parameters of the trading plan for TV for 27 October, 2014 were as follows: Short sale = 0.10 below the low of Figure 2 shows the 27 October 2014 trade on a 5-minute bar chart. The short sale was in the first 5-minute bar of trading. The pattern successfully predicted institutional sell-side pressure returning after a day in which the XRV bar (short at $32.69) travel range and volume were significantly higher than during previous sessions. The trigger is the result of Stop loss price = 0.05 above institutional traders coming back to finish what they started the previous day. 5-minute intraday overhead resistance (stop out at $33.07). Profit target = daily support inflection (buy-to-cover at $32.22) 2. A breakout of the pullback occurs on the widest range of the past ten sessions, preferably on heavy Once the trade is initiated, money-management rules volume. take over, and the position practically manages itself. There are three hurdles that TV must achieve in order to exit F3) XRV Pattern 2 Setup Trending Move Forms Consolidation Alaska Airlines without a loss. The first is that TV must trade down to within 50 per cent of the distance from the entry to the profit target. At that point, the stop loss is moved to breakeven. The second is that TV must trade to within 0.10 of the profit target. At this point, the stop is moved down to the 50 per cent to target level. The final hurdle is the profit target. When TV hits the target, all shares may be closed, or a portion may be closed, with a trailing stop placed on the balance in order to protect the open profit. For accounting purposes, we record all shares as being closed out at the target when Here we see a long trade setup from the 28 October 2014 plan for Alaska Airlines (ALK). Begin again by looking it is reached. As for the stop loss, at the daily chart. Notice that a trending move consolidates, even if only for two sessions. An XRV move higher violates the top of the consolidation, has the widest range of the past ten sessions, and is accompanied by we exit the trade immediately, if the high volume. The XRV bar had an upward thrust, so the entry the following session will be 0.10 above the stop loss is hit. high of the setup. As represented in Figure 2, the intraday trade in TV hit the 54

4 Strategies 50%-to-target level within minutes of the trade being initiated, moving the stop to breakeven. When 0.10-to target was achieved, the stop was moved to $ This locked in a profit and created a risk-free position. When the target was hit at $32.22, the position was closed. The profit was 0.47 per share traded. XRV Pattern Type Two The second XRV chart pattern is also easy to spot, and occurs when a trending move pauses and forms a consolidation range. This time, we are looking for a trend or counter-trend breakout of the consolidation range. The rules for a type 2 long entry are as follows: Figure 4 shows the intraday 5-minute chart and the progression of the trade once it triggered. Note that XRV trades are frequently accompanied by rapid intraday moves, as buying or selling pressure reassert during trading. This is particularly true during the first few minutes of the session, and is caused by the flood of directionally biased orders that were staged prior to the market open. These orders can result in extreme volatility due to the fact that they are frequently placed as market-on-open orders. They exhaust liquidity and push price rapidly in the direction of the XRV daily momentum. Once these orders have been filled, price frequently reverts toward the prior session s close 1. A stock that is trending higher consolidates for several days. 2. A breakout of the consolidation occurs on the widest range of the previous ten sessions, preferably on heavy volume. 3. The buy entry is the following session, $0.10 above the extreme of the XRV bar in the direction of the breakout. 4. Close out at the end of day, or at the overhead daily resistance target, or on a trigger of a protective stop. The rules for a short sale are as follows: 1. A stock that is trending lower consolidates for several days. 2. A breakout of the trend pullback occurs on the widest range of the previous ten sessions, preferably on heavy volume. 3. The short-sale entry is the following session, $0.10 below the extreme of the XRV bar in the direction of the breakout. 4. Close out at the end of day or at the underlying daily support, or on a trigger of a protective stop. Figure 3 provides an example. The components for a potential entry were in place. The parameters for the upcoming session were: Entry = 0.10 above the high of the XRV bar (buy at $52.02) Stop loss = 0.05 below 5-minute intraday support from the trading that occurred in the XRV setup day (stop out for a loss at 51.39) Profit target = inflection at daily resistance (sell for a profit at $52.50) Strategy Snapshot Strategy Type: Time Horizon: Setup: Entry: Stop-Loss: Take Profit: Trailing Stop: Risk and Money Management: Average Number of Signals: Trend breakout or breakdown Daily chart (setup), 5-minute chart (trade) A trending stock pulls back or consolidates. The XRV bar breaks out of the pause with the widest range of the past ten trading sessions above the high of the of the breakout bar for longs, 0.10 below the low of the breakdown bar for shorts Below 5-minute intraday support for longs, above 5-minute intraday resistance for shorts. Both stops are based on setup day price activity. Daily overhead resistance for longs, daily lower support for shorts 50% to target trails stops on open positions to breakeven; ten cents to target trails stops to the 50%-to-target level Allocate daytrading capital equally to each planned trade on any given day. Minimum reward-to-risk is 1:1. Maximum loss is to setup day 5-minute support or resistance stop. 22 trades generated on average per month since 2006 Year Planned Trades Triggered Trades Profit Per Share Traded $ $ $ $ $ $ $ $ $14.89 Total Return Per Share Average Return Per Share $ $

StrategieS F4) XrV trade Day in alaska airlines (alk) exploited to provide both shorter and longer time frame opportunities for profit.

Trading a fixed lot size of 1,000 shares, the XRV generated an average annual return of $20,390 or 20.39 per cent.

free at $52.02. ALK reversed, stopped out at break even, and then reversed again, triggering a second entry. The next extension took price to the profi t target at $52.

5 StrategieS F4) XrV trade Day in alaska airlines (alk) exploited to provide both shorter and longer time frame opportunities for profit. Success of this Pattern Held to the strictest interpretation of these guidelines the XRV has generated significant results in a $100,000 non-compounded trading account each year since Trading a fixed lot size of 1,000 shares, the XRV generated an average annual return of $20,390 or per cent. Accounting for the fact that a $100,000 account could generally leverage more than 1,000 shares per trade, ALK moved to the 50%-to-target level, and the money management rules moved the stop to risk free at $ ALK reversed, stopped out at break even, and then reversed again, triggering a second entry. The next extension took price to the profi t target at $52.50 and closed out the position for a 0.48 per share profi t. this return could easily be increased substantially by assuming additional risk on each position. The most significant characteristic of the XRV is the stability of the pattern over time, and within seconds. This makes trading XRV s at the opening bell challenging for newer traders. Those who are unfamiliar with how to deal with fast market conditions frequently benefit by waiting five to ten minutes for the market to settle in. More advanced traders often choose to use bracket orders or algorithmic sequences to account for and trade during the opening-range volatility. The trades in TV and ALK do a nice job of showing the basic form of the setup. Identification of the pattern on a daily chart is easy, and we usually do so without the fact that it tends to outperform on the short side of the market. Short sales produce more profitability even when the broader markets are making large positive swing moves as they did in 2013 and The returns presented here are not curve fit or back tested, but rather are the actual results for XRV triggers as they were planned and published in the author s trading plan since Each trade is rule-based and handled by strict money management criteria in order to maximize replicability. A copy of the rules and every XRV setup since 2006 is available at the aid of any scanning software. We find that flipping through roughly 1,000 charts each evening takes only about an hour, and provides valuable context that is not available when a computer does the work. The XRV is so easy to spot, that it makes an ideal place to start looking for high probability trading opportunities. Once the basic pattern is mastered, many variations can be Looking Ahead In the next article we will move to the longer time compression, and demonstrate how XRV setups can generate significant profitability in a swing trading time frame. Then, in the third instalment, we will shift gears and return to intraday trading, showing how XRV s can be used to capitalize on live news events during the trading day. These trades are planned and executed from a 5-minute chart, and many last no more than a adrian Manz Adrian Manz (PhD) has been a professional stock trader for 16 years. He is the author of two trading books, and publishes the Daily Income Trading Plan, a nightly blueprint for what he will do in the markets the following day at traderinsight.com. adrian@traderinsight.com minute or two. In the fourth instalment, we will once again focus on intraday setups, this time discussing how XRV pattern failures can lead to substantial reversalentry opportunities. Finally, in instalment five, we will discuss how floor trader pivot lines can be used as timing mechanisms to provide significant additional opportunity for profit. «56

Around The Horn Plan

Around The Horn Plan Friday, June 22, 2018 Confluence 96.27 S/R Levels 95.96 96.23 96.70 Symbol ABBV Sector Symbol $BTK.X Description ABBVIE INC Pattern Fast Ball Biotechnology Position Short Resistance