Buy at Support - Sell at Resistance

Thursday's Buy and Sell Alerts (SPY, QQQQ and QID)

Traders who correctly calculated the following areas of Gathering Support and Gathering Resistance on Wednesday evening reaped the following profits during Thursday's trade.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min02SPY.PNG



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Chart5Min01QID.PNG
 
Mr_Nasdaq said:
Traders who correctly calculated the following areas of Gathering Support and Gathering Resistance on Wednesday evening reaped the following profits during Thursday's trade.
Click to expand...


Hi Mr_Nasdaq, your areas of support and resistance are obviously interesting setup zones for entering trade. But how do you determine your stop? How do you make sure you don't get stopped out by a sudden shakeout or upthrust bar? I'm assuming you're using a comfortable stop, but your target will have to be further then in order to have a nice profit factor...
 
firewalker99 said:
Hi Mr_Nasdaq, your areas of support and resistance are obviously interesting setup zones for entering trade. But how do you determine your stop? How do you make sure you don't get stopped out by a sudden shakeout or upthrust bar?...
Click to expand...
Hi firewalker,

The diabolical market delights in shaking traders out of their positions, as you suggest.

One of the benefits of establishing a trade at either an area of Gathering Support (Buy Alert) or Gathering Resistance (Sell Alert) is that it limits the markets ability to do that.

It's always better to buy at Support instead of at Resistance. Likewise, it's always better to sell at Resistance instead of at Support.

Traders who are unaware of the locations of these areas often find themselves doing the exact opposite.

Nevertheless, your question regarding stops is a valid one.

Here are my rules regarding stops at areas of Gathering Support and Gathering Resistance:

1) Before entering a trade, establish the maximum amount that you are willing to lose if the trade moves against you.

2) Honor your pre-established amount if and when it is reached. Do not hesitate, rationalize or hope...get out. There is always another trade just around the corner...no need, therefore, to allow one trade that isn't working (for who knows what reason) to ruin your day.

3) The size of your pre-established amount may vary from stock to stock. I find that for the relatively sedate QQQQ, a maximum 10 to 15 cent stop at an area of Gathering Support or Gathering Resistance works well.

Additional Techniques at areas of Gathering Support and Gathering Resistance:

Traders can increase the odds of a successful trade by making additional observations once a stock reaches an area of Gathering Support or Gathering Resistance:

1) Candlestick Patterns: The 'Traderpedia' section of Trade2Win includes a list of bullish candlestick patterns that can be used, when they occur at an area of Gathering Support, to confirm that it is, indeed, time to venture a purchase. 'Traderpedia' also includes a list of bearish candlestick patterns that can be used, when they occur at an area of Gathering Resistance, to confirm that it is, indeed, time to venture a short sale. http://www.trade2win.com/traderpedia/Candlestick

2) '20-Period Moving Average' of a 5-Minute Chart: Conservative traders will wait for the '20-Period Moving Average' of a 5-Minute Chart to roll over at an area of Gathering Resistance before venturing a short sale. It's another technique to confirm that Resistance has, indeed, been found and that a reversal down has begun. The following 5-Minute Chart of the QQQQ provides an example of this approach:

Chart5Min97Qb.PNG
 
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Monday's Sell Alert (EBAY)

Mr_Nasdaq said:
Additional Techniques at areas of Gathering Support and Gathering Resistance:

Traders can increase the odds of a successful trade by making additional observations once a stock reaches an area of Gathering Support or Gathering Resistance...

...The '20-Period Moving Average' of a 5-Minute Chart: Conservative traders will wait for the '20-Period Moving Average' of a 5-Minute Chart to roll over at an area of Gathering Resistance before venturing a short sale. It's another technique to confirm that Resistance has, indeed, been found and that a reversal down has begun.
Click to expand...
Monday's Sell Alert (EBAY)

Traders who correctly calculated the following area of Gathering Resistance (Sell Alert) over the weekend reaped the following profits during Monday's trade.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min01EBAY.PNG

 
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Mr_Nasdaq said:
Here are my rules regarding stops at areas of Gathering Support and Gathering Resistance:

1) Before entering a trade, establish the maximum amount that you are willing to lose if the trade moves against you.

2) Honor your pre-established amount if and when it is reached. Do not hesitate, rationalize or hope...get out. There is always another trade just around the corner...no need, therefore, to allow one trade that isn't working (for who knows what reason) to ruin your day.

3) The size of your pre-established amount may vary from stock to stock. I find that for the relatively sedate QQQQ, a maximum 10 to 15 cent stop at an area of Gathering Support or Gathering Resistance works well.
Click to expand...

Hi Mr_Nasdaq, thanks for your explanation. I agree that you must determine your maximum amount of money you're willing to lose before you enter a trade, rather than in the trade when your emotions are influencing your objectivity. But if you place your stop based on the money you can afford to lose than I think you will get stopped out on different occasions (unless you feel you have a lot of money you can afford to lose).

It seems more reasonable imho to place a stop at a point where you think the market won't go, unless you are very wrong. If it does go that way, you'll then now that you were wrong with your initial direction but these things happen. If you just get stopped out because you weren't willing to lose 2 points to gain a potential 10 well than this might happen again...
 
AMD - Tuesday's Buy Alert

The 5-Minute Chart below shows that traders who waited for AMD to fall into its area of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of jumping in too soon.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min01AMD.PNG

 
RMBS - Wednesday's Sell Alert...

The 5-Minute Chart below shows that traders who waited for RMBS to rise into its area of Gathering Resistance before venturing a short sale executed a profitable trade by avoiding the common trading error of jumping in too soon.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min01RMBS.PNG

 
ORCL - Thursday's Buy Alert

The 5-Minute Chart below shows that traders who waited for ORCL to fall into its area of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of jumping in too soon.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min01ORCL.PNG

 
QQQQ - Friday's 5-Minute Chart...

The QQQQ dipped to Gathering Support in early trade on Friday in reaction to a weak 'Housing Starts' report...the weakest report in 6 years. Nevertheless, Support was found and the still buoyant QQQQ recovered to close 'even' on the day.

Friday's 5-Minute Chart (below) shows the dip to Gathering Support and the subsequent recovery.

On Monday, the QQQQ remains deep in overbought territory and faces a wider than usual area of Gathering Resistance between $44.30 and $44.60.

At 10:00am (EST), the market will focus on the Leading Economic Indicators Report...one number representing 10 individual economic indicators that, when taken together, suggest either future strength or future weakness in the economy.

Chart5Min103Qs.PNG
 
QQQQ - Monday's 5-Minute Chart...

The QQQQ delivered a volatile day on Monday with a spike down at the open followed by a recovery and a spike down in the afternoon, also followed by a recovery. In between spikes, the QQQQ managed to eek out a new high for 2006 when it printed $44.48.

Monday's 5-Minute Chart (below) shows the day's volatility and a wider than usual area of Gathering Resistance.

On Tuesday, the QQQQ remains deep in overbought territory where it has been content to dwell in recent days.

No one really knows on what day a meaningful pullback will begin. Some speculate that it will be one day in December. Others say, "after the New Year".

It may be that the goal of the QQQQ is long-term Resistance at the upper trend line of the Weekly Chart which stands this week at $45.50.

Whether the pull back comes sooner or later, it's time to "be careful out there".

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min104Qs.PNG
 
Wednesday's Buy Alerts...


Traders who correctly calculated the following areas of Gathering Support (Buy Alerts) on Tuesday evening reaped the following profits during Wednesday through Friday's trade...

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.


Chart5Min01APAz.PNG


Chart5Min01OIHz.PNG


Chart5Min01QCOMz.PNG



 
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QQQQ - Friday's 5-Minute Chart...

The QQQQ demonstrated on Friday that it remains in 'buy the dips' mode. After gaping down at the open, it recovered to yet another new high for 2006 when it printed $44.86.

Friday's 5-Minute Chart (below) shows a gap down open followed by a rally to Gathering Resistance after which the QQQQ pulled back into the close.

On Monday, the QQQQ may stay put while it awaits the week's string of Economic Reports, the first of which arrives on Tuesday.

The most important report of the week will arrive at 8:30am Wednesday morning. It's the 3rd Quarter Gross Domestic Product (GDP) Report. The GDP is defined as 'the market value of all final goods and services produced within the U.S. in a given period of time' and, therefore, is an indication of whether the economy is growing or shrinking and by how much.

It's sure to be a market mover.

Chart5Min107Qs.PNG

 
QQQQ - Monday's 5-Minute Chart...

The overbought QQQQ finally succumbed to some serious profit taking on Monday.

Monday's 5-Minute Chart (below) shows how the QQQQ continued it's pullback from Friday's area of Gathering Resistance and how the force of the pullback was such that it violated not one, but two, areas of Gathering Support.

On Tuesday, the QQQQ will face a number of Economic Reports, each of which is a potential market mover:

7:55am - Retail Chain Store Sales
8:30am - Durable Goods Orders
10:00am - Consumer Confidence Report
10:00am - Existing Home Sales

Chart5Min108Qb.PNG
 
QQQQ - Thursday's 5-Minute Chart...

The QQQQ dipped in the morning, then rallied, then closed pretty much unchanged on the day, resulting in a Doji style candlestick on the Daily Chart. A Doji is a sign of indecision. When one forms at an aspect of Resistance, however, it becomes a caution. $44.10 represents a 50% retrace of the recent pullback. That makes it a Resistance level that traders have their eye on.

Thursday's 5-Minute Chart (below) shows a 3-day up trend from Tuesday's Low. It's joined by the '200-Period Moving Average' to form a very short-term area of Support between $43.94 and $43.95.

On Friday, traders will be watching short-term Resistance at $44.10 and short-term Support at the rising trend line of the 5-Minute Chart ($43.94) in order to see which one gives way first.

The still weakening U.S. Dollar hit a 20-month low on Thursday, thereby, providing a continued boost to commodities such as oil, gold and their related stocks.

Chart5Min111Qs.PNG


 
QQQQ - Friday's 5-Minute Chart...

The QQQQ demonstrated on Friday the dangers of a Doji style candlestick at Resistance. A Doji at Resistance is often a sign that a reversal down is at hand. Resistance in this case was $44.10 (the 50% retrace of the Monday thru Tuesday pull back)...See the Daily Chart (not show here).


Friday's 5-Minute Chart (below) shows a violation of short-term Support at the rising trend line followed by a visit to Gathering Support. Gathering Support, having been violated in early trade by a sharply falling QQQQ, served as Resistance for the remainder of the day. This is in accordance with the principle of Support that states, 'Support, when violated by a falling price, becomes Resistance'.

On Monday, the QQQQ is poised to test Support at its rising 20-Day Moving Average. A violation of that long standing line of Support opens the door to a test of Support at the 50-Day Moving Average which stands at $42.45 going into Monday's trade.

Support at the 50-Day Moving Average is joined on Monday by Support at the Weekly S2 Pivot Point. Together, they form an impressive area of Gathering Support for the coming week.

Chart5Min112Qs.PNG


 
AAPL - Friday's Buy Alert

Mr_Nasdaq said:
Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.
Click to expand...
The 5-Minute Chart below shows that traders who waited for AAPL to fall into its area of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of 'jumping the gun'.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min01AAPLz.PNG
 
QQQQ - Monday's 5-Minute Chart...

The QQQQ opened strong on Monday and continued higher, establishing more than a full recovery from Friday's pull back.

Monday's 5-Minute Chart (below) shows the details of the light volume rally.

On Tuesday , the QQQQ will focus on the 10:00am Factory Orders Report. The report shows how busy factories will be in coming months as manufacturers work to fill new orders. It is, therefore, an indication of the health of the economy.

The Factory Orders Report may receive more than the usual attention from traders since it was a weak manufacturing related report that triggered last Friday's pull back.

Chart5Min113Qs.PNG
 
QQQQ - Tuesday's 5-Minute Chart...

The QQQQ held onto gains from Monday's rally on Tuesday by spending the day in a narrow trading range that became more narrow as the day wore on.

Tuesday's 5-Minute Chart (below) shows the development of a triangle from which the QQQQ will break either up and out or down and out.

On Wednesday, no economic reports are scheduled for publication. The QQQQ will trade, therefore, based on whatever steam it has left.

If the QQQQ is, indeed, moving up and down within the context of a trading range as the ADX Indicator on the Daily Chart suggests, then, it has now risen to the upper end of that range. This observation, in addition to the fact that Tuesday's price action resulted in another Doji style candlestick (see the Daily Chart) suggests that caution on the long side is in order.

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Wednesday's Buy Alerts...

Mr_Nasdaq said:
Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.
Click to expand...
The 5-Minute Charts below show that traders who waited for BRCM and SMH to fall into thier respective areas of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of 'jumping the gun'.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

Chart5Min01BRCMz.PNG


Chart5Min02SMHz.PNG


 
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