My average holding time for a stock is a week to a few weeks(rarely longer unless I get lucky) and 1-3 days if things go bad. Part of my philosophy as a trader is I have to have at least a 2:1 R:R into the next resistance level in order to take a trade. Because of this, my setups have been limited to Landry style entry pullbacks and buying breakouts of tight consolidating stocks near alltime highs. I have not had luck in the past trying to trade off of technical patterns; cup and handle, etc. because I am focused on quick thrusts and see the market in building blocks... once the chain of higher high and higher low trend legs are violated, I don't like the stock anymore. I am looking for setups anyone might care to share with me for a trader of my time length. That, or recomended literature.
One VERY bullish, consistant longer term formation is a short white candle gap up from an extended base. Often a stock will form a long base before gapping up with a short white candle. The stock should trade above $40 for this formation to be most effective. The breakout should be greater than 7% on heavy volume. As you can see amazon formed a solid white candle on huge volume surging 20% in a single day. This set the stage for another 15 point gain so even if you missed out on the first day rally you still could have made lots of money. This is arguably the most effective, profitable short term swing trading method in existence.
I only know very basic candlestick analysis. Could you mark the chart by any chance? From the looks of it, I would not buy the stock based on my time limit simply because it was so far extended from its base that it would consistute a smaller holding time. Any books on candle sticks that you recomend?
This setup is applicable for position trading, swing trading and day trading. http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880 It's been very profitable for me and helps me identify other profitable price action that have nothing to do with Japanese Candlestick patterns. Thus, it can also be used as a filter for other methods. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
I included a link in the post above this isn't in any book But if you want to learn the basics of candlestick charting go here http://www.candlesticker.com/Default.asp but the problem with candles is that they don't take into account the magnitude of the formation in relation to the entire chart.
Ok sorry about that I don't know why I didn't understand that in the first place. That setup looks like it does provide a great r/w and moves very quickly... For interday setups, how often would you say this occurs? Nihaba: thanks, I will check out your thread. Note that when I buy a stock, I use a landry entry: the stock must break the high of the previous day. Many times I end up buying bullish reversal candlesticks, but I do not ignore other entries. Maybe this is a fault and leads to less consistency in my trading?
I have been going over all my books since the start of the summer and decided to see if I could find some more nuggets from dave landry on swing trading. Found his entry on micro cup and handle patterns to be very interesting. Essentially, you are looking for a shorter frame cup and handle formation near all time(or at least few month) highs and instead of waiting to the upside, you buy the break of the high of the previous bar on the formation of the handle just as you would with a pullback. Now, if the handle pulls back far enough and the last bar is relatively small range, you can great r/w. Even if the stock doesn't pass the top and confirm the cup and handle breakout, you will at worst breakeven if you have good money management and if it breaks, you position yourself for a huge move. That is all...still looking for more answers. I read the first 10 or so pages on the candlestick thread... interesting stuff. Not something I can trade off of in the next few weeks, but maybe in a few months... I do need to pick up a book on the basics first though.
I haven't been using the micro patterns as much in more recent times. I have some free webcasts that cover my newer patterns. You can email me at dave at davelandry.com and I'll send you the links (not sure if I can post them here because they might be considered "commercial" links). Dave