Focus List 11/4 - Text Book Trend Day

Geoff Bysshe | November 4, 2011

Today is a good day to have mental impression of in your trading brain.

In yesterday’s Focus List I emphasized the likelihood of a trend day occurring today or soon. While the trend day did not start at the low and end at the high it was a very nice trend day. It started strong (with a gap to big to chase), retraced to create a 30-min OR reversal pattern (which I said to watch out for) and then trended higher for the whole day.

To make it even more deserving of a title of “text book” example of an OR Reversal Trend Day, the low of the day was right at the Floor Trader Pivot (FTP) in the SPY, QQQ, and IWM. The DIA low was at the prior day’s high. Both the FTP and prior high, were points I also said to look for as OR reversal points.

I’m not trying to say “I told you so” for my benefit, but rather to demonstrate that these are principles we teach and share that you as a reader or member of MarketGauge should be able to recognize! I want you to see that you know this stuff! And more importantly – remember it for next time.

The pivots were stacked, the daily chart was compressed on support, the open was strong, the OR low lined up with very important key reference points! This is why I was able to anticipate the prior day high, FPT and trend day all had good potential.

If you were in the Day Trading with HotScans room you had Keith telling you  - short the gap, cover at 10:00 low, buy the OR Reversal, take profits at the 30-min. OR high (and high of the day), buy the 30-min. OR breakout, close out near the high of the day at the end of the day.

It wasn’t necessarily an easy day if you worried about all the noise of the global events, but the market did what markets do – follow the patterns. As a trader you want to be able to quickly recognize days that are following the patterns you know!

As for tomorrow (Friday)…

Friday’s are always hard to call because the weekend risk and it’s hard to weigh whether the market will be taking profits or shedding risk, and who’d doing which – the shorts or the longs.

Falling back on our rules…
The pivots are stacked and the close was strong. Look for support at the FTP and S1. The daily swings have support just above so look for the daily swing high and R1 and R2 to be formidable resistance unless the market gets some unexpectedly good news. The day after a trend or expansion day is best traded with the expectations that R2 is as much as you can ask for.

Long Side
CAH
PM
NSC
FSLR

Reversal

BIDU
NFLX
GOOG
CVI
IBM
GPC
RRC
VLO
COG
LULU
COH

Must clear R1

BBBY
LVS
TIF
TSCO

Shorts

ESRX
TWC
WLT

APKT

Must Break S1

AGP
LIFE