Friday, January 3, 2014

Momentum Trading ROUND NUMBERS

Hey folks. 

I wanted to share with you a cool "momo" trading technique i use all the time in my personal trading. I think it will be helpful to many of you especially the more short term traders here. 

As many of you from the chat room might know, i love to trade around "ROUND NUMBERS" so when prices of Momentum stocks approach ROUND NUMBERS like $5, $10, $20, $50, $100 etc. I pay especially close attention as i am aware if these numbers are broken, they can catapult stocks even higher. Almost like a "turbo boost" after a Round Number breakout.  

So for example: check out CCIH and BWEN : these are two stocks i traded today and here's what i saw in these plays: 

First of all , CCIH was emailed to ART OF TRADING members last night in the watchlist.. Breakout was $10.. Now, for my style of trading.. i typically prefer to enter BEFORE a breakout area IF and ONLY IF i feel like a breakout is "imminent". Here's the DAILY CHART in CCIH: 




In the above CCIH chart: Can you clearly see a  "CUP and HANDLE" pattern there?  I Do : Hopefully you all saw a pattern that looks like this? 







Now, here's how i traded the CCIH intra day chart: 

Once i saw the CCIH 'CUP and HANDLE' on daily charts. I realized that this stock has very big potential to break over $10.. Stock was trading at $9.60: at that point in time.. I quickly entered buying 3,000 shares at an average price of: $9.62





Booked  $2,000 on this trade all in just under 15 minutes worth of work... CCIH is trading higher than my exit but that's okay. Happy with gains and the exit. You cannot buy the exact bottom and you cannot sell the exact top. 



Even if you bought it late or even if you bought it at the $10 breakout(entry): CCIH woulda still been good for a cool 8-10% gain . 





Another Setup i played today and also belongs to the $10 "Round Number" Technique : 

BWEN: here's what i saw on this DAILY CHART : 





This setup was also a  'CUP & HANDLE' pattern that was setting up just under $10 resistance... Stocks that base for a few days in small narrow ranged candles for a few UNDER a strong resistance level are very appealing to me.. Because once they crack thru resistance, they can make nice runs. 



Picked up 5,000 shares of BWEN at an average price of $10.17 > so i was a little late with my entry on this one as the ideal entry SHOULD have been closer to $10.00 but i was a little distracted and missed the first entry... That's okay tho, since i felt like BWEN still has more run up left in it. 




The overall market was showing signs of weakness as this trade was developing so i opted to exit with a $1300 gain and move back to ALL CASH at that point. Don't over stay your welcome and what ever you do never allow a nicely GREEN trade go RED. Raise stops, Trim some gains etc.



Conclusion:

In the two trades shown above , i day traded two "momo" stocks that were flirting with that KEY "$10 ROUND NUMBER" area... In CCIH i entered AHEAD of the $10 breakout anticipating a breakout which worked very nicely(even if you got into CCIH on that $10 breakout entry, you woulda done well) . 
For BWEN, i entered a little bit late but was aware that BWEN did the hard job which was to breakout over $10 so chances were very high it was gonna keep running. When stocks start to approaching ROUND NUMBERS or breakout over ROUND NUMBERS.... pay very close attention !

Even tho, i personally day traded these two ideas, most of the ideas that take place at AOT or alerted to members are intended to be / normally are SWING TRADES. 

Any questions, comments or feedback welcomed!






No comments:

Blog Archive