Trading Lessons from the Intraday Frame (study)

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Aileen McLaughlin
5 years ago
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3 3 Deep Dive on Trade #2 (Range Day Fade) For today's lesson, let's study Trade #2 which was a textbook "Range Day Fade Trade." Range Days often begin with a small (or no) gap especially when our game plan calls for a low volatility environment as it clearly did last night. While Trade #1 was successful, Trade #2 calls our attention due to its clarity. On Range Days, we look to "fade" price into the upper or lower Bollinger Band or similar trendline/price level especially when divergences - in TICK or Momentum - are present - Note also the lengthy divergence into the entry here.. We expect price to REMAIN within the daily range and thus trade back toward the prior low or lower Bollinger Band (in the case of a short-sell). Aggressive traders can enter on the touch of the Bollinger, but we can see that price made many new 1-min highs beyond the Bollinger Band. I prefer a TRENDLINE BREAK entry short as is the case here. We place our stop at least 2 points above the session high (more if you can handle the risk) and then ideally play toward the lower Bollinger Band or when price breaks above a falling trendline. Despite all that work, the trade was good for roughly 4.5 /ES points while risking at least 2 points as it was a slightly smaller profit outcome than the 8 point target that would have been achieved at the lower BB TheoTrade LLC. All rights reserved.

4 4 Major Companies Reporting Earnings McDonald's (MCD) Major Economic Reports for Tomorrow... NONE Quotes from Last Night's Planning Now we're AT the high volume node near 2,670 and thus should expect range contraction/consolidation at the 2,670 level like we saw earlier. While the intraday chart shows price between recent support and resistance levels at the Point of Control - giving us NO edge - the Daily Chart shows us a successfully achieved target into the 50 day EMA again near 2,670. Use this as your departure point going forward TheoTrade LLC. All rights reserved.

5 "Power Trender" Strong Stock Scan We're seeing the NEW top twelve relative strength leaders (via algorithm) in trending markets and the general expectation is to buy retracements or breakouts in

5 5 "Power Trender" Strong Stock Scan We're seeing the NEW top twelve relative strength leaders (via algorithm) in trending markets and the general expectation is to buy retracements or breakouts in these strongly trending names. The logic is that what is strong tends to get stronger (stocks attracting money flow tend to continue attracting additional money flow). Right now these would be the names and thus candidates above for you to do additional research and add these to your stock-scan list for possible inclusion into a swing trading portfolio on pullbacks or outright breakouts. HOW WE USE THESE STOCKS: I write the Power-Trending Stock Section for Swing Traders looking for candidates that complex stock scans will likely miss. The scan targets strongly trending stocks and the expectation is that price will continue trending higher, though of course additional analysis is required rather than just buying these names collectively. To participate in these stocks, we typically wait for a pullback/retracement to a rising moving average or Fibonacci/Trendline level to put on a buy/retracement where the stop is trailed under the average. These would be similar to how I describe intraday 'flag' retracements on a developing Trend Day TheoTrade LLC. All rights reserved.

6 "S&P 500 Sector Performance" View This chart and sector comparisons are useful two ways: First, we get a broader sense of what's going on beneath the market subdivided into sectors.

6 6 "S&P 500 Sector Performance" View This chart and sector comparisons are useful two ways: First, we get a broader sense of what's going on beneath the market subdivided into sectors. Second, if you trade beyond the S&P 500 or futures/etfs, you can pinpoint bearish/weak stocks by starting with bearish/weak sectors. The idea is out outperform the market via short- selling a weak stock(s) in weak/bearish sectors on a down trend day (or vice versa) TheoTrade LLC. All rights reserved.

7 Tightly Compressed SP500 Stocks (Low ADX Scan) Here are the top six "Compressed ADX" (lowest ADX) values from our simple scan of the S&P 500 (in Think or Swim).

7 7 Tightly Compressed SP500 Stocks (Low ADX Scan) Here are the top six "Compressed ADX" (lowest ADX) values from our simple scan of the S&P 500 (in Think or Swim). The goal of this simple stock scan is to identify compressed or consolidating (RANGE) stocks and either: A) Play the fades (like a Range Day) into the trendlines by shorting the high and buying the low or B) Put these on a separate watch list and then WAIT for a breakout event to trigger a buy or sell-short swing trade to trade the RANGE EXPANSION play after the current CONTRACTION. Or, you could trade more complex strategies like butterflies, iron condors, or even prepare in advance for a possible breakout with straddles or strangles (advanced options traders). We'll update this scan and ideas like it at the beginning of each week TheoTrade LLC. All rights reserved.

8 Planning the 60-min Intraday @ES Futures Chart This should be a fun one to trade next week!

8 8 Planning the 60-min Futures Chart This should be a fun one to trade next week! With the market poised right at our point of control at 2,670, set up your next trade(s) in terms of the DEPARTURE away from this level on another likely Range Expansion Event. Don't guess, plan and trade. 2,670 is a magnet/gravity spot where buyers and sellers are at equilibrium, and our trade will be to join with the winning side on the range expansion from this zone. Ideally, look for price to go beyond the recent range high or low, be on guard for a trap (a return back inside the trendlines), and if there's no trap, play the range expansion back toward the highlighted zones (without bias) TheoTrade LLC. All rights reserved.

9 Planning the Next Day (Daily S&P 500 Cash Index) While the intraday chart shows price between recent support and resistance levels at the Point of Control - giving us NO edge - the Daily Chart

9 9 Planning the Next Day (Daily S&P 500 Cash Index) While the intraday chart shows price between recent support and resistance levels at the Point of Control - giving us NO edge - the Daily Chart shows us a successfully achieved target into the 50 day EMA again near 2,670. Use this as your departure point going forward. Focus on the hourly/lower timeframe chart for clearer boundaries and a breakout plan next week TheoTrade LLC. All rights reserved.

10 10 Disclaimer: Neither TheoTrade or any of its officers, directors, employees, other personnel, representatives, agents or independent contractors is, in such capacities, a licensed financial adviser, registered investment adviser, registered broker-dealer or FINRA SIPC NFA-member firm. TheoTrade does not provide investment or financial advice or make investment recommendations. TheoTrade is not in the business of transacting trades, nor does TheoTrade agree to direct your brokerage accounts or give trading advice tailored to your particular situation. Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past Performance is not necessarily indicative of future results TheoTrade LLC. All rights reserved.