May 25, 2015

Trade Recap - CMCM

This is my first trade recap in a while so I thought I'd make it special. I'm going to highlight one of my favorite trade setups for the 2pm - 4pm part of the trading day and highlight another one of my favorites in the next trade recap. Without further ado, let's talk about CMCM.

CMCM hit my scan mid-May 2015 because it had gone up from about $16.50 in March to $35 in May, which is a very impressive run.


On May 20th, I pulled up the intraday chart around 2pm and noticed CMCM had been in a trading range all day, which meant the stock was starting to flag. Around 2:30pm, CMCM tested and failed at the high of day (HOD) and then immediately failed its uptrend line with a strong bear breakout bar. I should've shorted after the HOD failure because CMCM was in a trading range, but I just wanted more information. I entered short (smaller red arrow in the next picture) at the close of the strong bear breakout bar under the uptrend line. My risk was to the high of the breakout bar (blue arrow) with a target equal to my risk (1R and indicated by the yellow arrow). My target was hit and I covered as indicated by the green arrow.



So what type of trade is this and why do I like it? This is a reversal trade at a HOD failure combined with an overextended (OE) daily chart, meaning that the chart was due for some consolidation (not guaranteed by any means but it was probable; however, I was prepared to go long as well because trends have momentum, think Newton's First Law of Motion). I love this trade because it combines several events that increase the probability of a directional move down. An OE daily chart + HOD failure + uptrend line fail = high probability pullback with modest risk because swing longs will take profits, breakout buyers cut their loses after the failed breakout, or they'll become bag-holders and cause an even deeper correction when they finally capitulate. You can't ask for much more near end of day (EOD)!

What about you? What's your favorite EOD trade? Leave your 2 cents in the comments below!

Thanks for stopping by FTG! Next up is a trade recap of my 2nd favorite EOD trade. Stay tuned!

Take care!
Jory

No comments:

Post a Comment