Is a mug's game (if it is anything like the eminis!) Whatever the formula to making money in this market it definately revolves around top/bottom picking or fading reversals.
I heard a rumor that it was caused by an error by a big player who entered an incorrect number of contracts on a buy. I was flat at the time but was able to play the pullback after the initial thrust. NQ's are offering some nice 8-12 point moves that translate to about a .20-.30 move on the QQQ. Looking for more has been tough lately, I am taking QQQ profits at .20-.30 range.
Hitman- maybe we're thinking about 2 different flags...I generally look to buy the break of a channel for a continuation pattern so my entry wouldn't be a "new high" I've added a chart...this is the set up I used for my qqq 5 min chart today Peace! uptik2000
Even if you had a limit sell order in to exit at a profit target, you were not likely to have been filled > 1640. The move lasted about 30 seconds and most fills above 1640 were in a 15 second window. The volume > 1640 was around 200 compared to 5,146 total volume for that 5m bar. I was long before the up move and had a limit order at 1631.00 (playing the false breakout above resistance). My sell order was in the queue about 10 mins before the move happened, and I still got filled at only 1633.00 on the downswing. I saw my P/L tick up over $8k only to drop back down to reality. What would have sucked is if you had a buy stop above Friday's high at 1676 and got that 1679.50 fill. Ouch!
Fella - if that flag breakout worked on the eminis even most of the time I would be creaming it off! Normally you get high volume and a break of the last swing high as shorts are taken out then it goes back into a choppy generally down movement - not good for shorts either. Also if I saw a pattern anywhere near as neat as your 5 wave flag I would just ignore it as the whole world would be alert to it (bound to fail).
"I was long before the up move and had a limit order at 1631.00 " Playing that pivot point at circa 1632, eh? Smart guy - exactly what I would have done in that situation.
Funster- I don't trade the emini's..so I can't comment on them. The trade set up was there so I took it, and it worked. And I'm just sharing it. Much like I shared my JNPR setup last week. Of course not every setup works out. But, "you take your winners and you take your losers and you keep on fighting" again , I'm just trying to show whats working for me. uptik
Uptick: Don't get me wrong, that was a legit set-up but I am merely discussing my experience with not individual trades but the set-up themselve. Channel or not it really is the same thing. People tend to be very strict with their set-ups but in reality a bull flag is basically a move to the upside -> consolidation -> breakout into a new high. A lot of people make a big deal about the different criterias, in reality there really is nothing to it. When the market had momentum you could get away with buying new high's (text book break out). When the market got tougher late 2001 you had to buy from consolidation and anticipate the breakout before it actually happens. Of course I didn't expect you to be buying new high's, as that strategy has been obsolete on all but the highest momentum day's. Where you buy from the consolidation doesn't really matter, because closer you buy toward the low, lower the risk, closer you buy toward the high, higher the risk but you get a higher percentage shot. Nowadays I buy a partial position from the low of the consolidation, with good tape reading I can usually identify the precise print of the low of the actual flag (if the specialist makes it hard then I usually pass up the trade). By the time you get the equivalent channel breakout (I identify it by looking for a big offer and the stock takes it out), I usually put on the full position and will be in the money 10-20 cents with my partial position (very important cushion for me to absorb potential crap-out's). When the market is really strong I usually add even more when the stock actually hits a new high. Even then I have been having a nightmare of a time simply because those flags even when successful has no follow-up's. You get a breakout which I usually try to take profit immediately unless there is a follow-up BID as there will be a lot of other people trying to fade it. My conclusion is while flag is still an effective strategy every now and then (namely the 10-11AM stretch when you actually have a little hope that the stock will trend), reversals (short term top and bottom pickers) are dominating the market right now, there has been very little reward for trading with the trend and too little risk for trading against the trend. Even if you are wrong you will not be spreaded half a point or so, you lose 10 maybe 20 cents at most, and the stock comes in at least as much if you pick the top successfully. Versus playing breakout's of any sort, the second someone pulls the BID, ouch, the next one is 20 cents apart . . . You have to decide whether you going to try to offer out your shares and hope some moron takes it (which may not be good as if they do take it chances are it is going higher), or sit and wait for him to break say the low of one of the previous candles (which still sucks because the BID after that candle may be another 10 cents away). The hardest part of this game right now is that it is very hard to make up for two quarter point losses as they are literally your potato (half point's being meat). A side effect is that as soon as someone is about to spread it up half a point (see LEN this morning from 47.75 to 48.25 in one print which saved my bacon), everyone and their mother (I do it too) offer their shares out to get filled there (nobody is looking for anything more than that), and there will be a tons of people looking to fade that breakout (as a matter of fact one of the filters my guys use is a gap-up filter as they short stuff like LEN). Because the market has no momentum, you sell first ask questions later, because the market has no momentum, people who fade this kind of moves make their bread and butter from it. The problem compounds as the moves become shorter and shorter. Nobody is trying to get double bottom breakout's anymore, people buy from the low of the second bottom and by the time it breaks out it is usually time to take some profit off the table, newbie traders who bought from the actual breakout have to sell now that the move is retracing, bam you get a failed double bottom break out. And volume, forget about it, on those days in most stocks by the time you see big volume prints the move is over. Yes, if you are lucky and catchs something with institutional volume, flag breakout's are still incredible opportunities, but text book pattern rules are meant to be bent and broken. You always have to stay one step ahead of the market and right now that means selling into breakouts (whether it be profit taking or going short).
Hitman- I agreee with you on your points. I too have traded highs and lows in the chop( one of which I posted last week w/ my order book on your january Journal thread). Realize that I am only trying to share ideas much in the way you have shared your trading with the members of this board. I've learned a lot from reading your journals and hope that you continue to post them here. Respectfully- uptik2000
Well the move caught me. I was substantially short in stocks and to hedge against a serious bull move in the market I had a buy stop on QQQ at 40.31. Being a swingtrader I don't hang around my computer all day, so imagine my surprise to come back a while later and find QQQ at 40.35 and me down 0.15 per share. Just one of the perils of electonic trading with instant execution I guess. I eventually sold the long QQQ at 40.32 and the subsequent gains in my short positions more than made up for the glitch. It was very annoying though.