I have a hotkey which brings up a linked chart that compares the stock I am looking to the futures. This lets me quickly see how correlated the stock is to the futures.
Don't get me wrong, I am not looking to find new trading styles. I do believe I can use two styles at same time, I really want some additional depth to my play book. So far everything I do starts with futures go into index and finally stocks that follow indexes. Have I perfected this style yet? Far from it. But in trading we are always looking for easy money, and I believe there are easy money to be made in thinner stocks that don't trade with futures.
Your style definitely works when there is more volatility. But one problem with AT financial is that the charts are automatically scaled to the high and low of the data in the chart window. So lately when the CEX, RLX etc. looks like its ripping...its really not. The same thing with the futures. Lately when the futures rip up on the chart, they are really only moving 1 point or two. What I do is I keep a two minute bar chart of the futures and a 10 or 15 minute below it. This lets me see the big picture. It also lets me see all of the near term support and rexistance levels from the past few days.
Hitman, the best patterns I know of are really simple stuff like "3 or 4 shooting stars" on a 1 minute chart at a normal reversal time. Or like the "3 or 4 hammers" on a 1 minute chart when the NQs are reversing to the upside. The best of all is probably the capitulation reversal (Like the GNP of Praetorian's) but on an intraday basis. And a very reliable setup is Ken Wollf's "Dumper"play. These are the ones I look for regularly... after the market gaps in the morning... and then after the reversals. Best of Luck! ~EC PS If you are scanning for setups the night before you might look at Stockcharts.com's scan on New Trending Stocks (ADX). I sort by ADX and Volume... it is useful.
(from www.mtrader.com) "Dumpers are stocks that dump 20% or more on mediocre bad news, such as missed earnings by 1 cent. The market ALWAYS over reacts to this bad news, and we play the bounce or correction at the bottom. We only play mediocre bad news and not real bad news dumpers such as missed earnings by 30% or SEC investigation news. The Dumpers Pattern is such that they will usually get sold at the open, and establishes the low of the day within the first 1/2 hour and correct to the upside. We guess at the bottom by watching the bid and ask and notice the rhythm of the changing as it falls. Then we look for trades occurring in-between the bid and ask which will signal a coming reversal. Ken's Book "Momentum Investing" details these methods." See WWW.MTRADER.COM or Ken's thread on Silicon Investor for more details. Good luck Oh yes... please don't accuse me of touting this service. I'm not... I just don't want to take credit for Ken's work. ~EC
El Cazador, I wouldn't accuse you of that. Actually, I appreciate the details you have provided. Great post & great teacher.
a note to the dumpers...they actually work short as well. It depends on how the dumper pattern is "currently" acting. Yes, the basic pattern is long after the first bottom. This has been working all winter and spring this year. But over the whole summer it was much more profitable to short those dumpers. The beauty of this pattern is, that it wont change every week. Usually dumpers will follow a certain pattern for a few months before changing significant. I have to say, whenever there is a stable pattern like the one during this summer dumpers are really great. Right now I see the dumper pattern changing a bit...some dumpers are still good for a short...some tend to provide very nice longs. Overall not as easy as a few weeks ago, but soon I think long will be the way to go again. Another interesting approach to gainers and dumpers is to trade a breakout out of the very first range established during the day. SUNW was an example for this type of trade. I usually wait for the first range if the patterns is not consistent and/or Level2 is shows a very indecisive situation.
Jens, excellent points and very nice graphics! Also... I think I read that when the first bottom fails (as this one did) the odds of the next short-term bottom (9:45ish) being playable goes up to like 85 or 90%... nice odds indeed. Play these dumpers both ways. PS For another good one look at COCO (Corinthian Colleges) today. 8-31-01