Posted 06 April 2004 - 11:47 PM
Someone should say something simple like, "Go someplace that has pivot points that WORK, and stick with them for the following day"
TASR PivotPoints: S5=48.73 S4=55.19 S3=65.63 S2=72.09 S1=82.53 P=88.99 R1=99.43 R2=105.89 R3=116.33 R4=122.79 R5=133.23,
If you have never tested Pivots or worked with their abbreviations, then: S=Support, R=Resistance and P is the projected open tomorrow.
Next you gather some basic EOD Moving Averages:
And find some site that gives you the daily 50% Retracement Value:
THEN you cook them together:
TASR Support/Resistance: (200DaySMA=25.81) S5=48.73 S4=55.19 (50DaySMA=56.10) (50DayEMA=58.63) (20DaySMA=65.36) S3=65.63 S2=72.09 S1=82.53 (VWAP=86.28) (50%Retrace=87.00) P=88.99 R1=99.43 R2=105.89 R3=116.33 R4=122.79 R5=133.23
At this point you have your Swing numbers for a stock you have already bought or shorted. If you are an EOD person who works all day on the East coast, then you should know that P=NEAR the next day's Open... about 50% of the time. Through daily observation, you should know that on boring days it will bounce between S1 and R1, or your source for Pivots is not good enough. And you should also know, when active Traders get involved then your stock will usually move in one of the following patterns: P to S1 to R2, or P to R1 to S2. You can set a long stop between R3 and R2; and you will probably still be in your stock tomorrow night. Or if you are margined short, you can set your stop above R1 and pray before you go to bed.
For you lucky West coast people who get up before 5AM and check the Pre-market, you are not done yet!!!!!!!!!
Early birds need to add more numbers to their S/R, plus know what to look for when you check your stock price. This is exactly why I chose TASR as an example,,, because it exhibits many of the alarms I look for.
Check news for the simple things: i.e. Earnings=04/20/2004, up-grades down grades etc etc
Get the previous days HOD and LOD:
Check it for distinguishable features:
After Hours close:
90.70 down 1.55
And any increased Confluence on the charts:
And cook it too:
TASR Support/Resistance: (200DaySMA=25.81) S5=48.73 S4=55.19 (50DaySMA=56.10) (50DayEMA=58.63) (20DaySMA=65.36) S3=65.63 S2=72.09 (wr7 Low=78.55) S1=82.53 (VWAP=86.28) (50%Retrace=87.00) P=88.99 (AH=90.70) (wr7 High=95.45) R1=99.43 R2=105.89 R3=116.33 R4=122.79 R5=133.23
At this point you are ready to see if any of your Pivots are obeying the pre-market moves. I always hold onto the numbers I used the day before in case we get a huge distortion like TASR did today. S/R is normally tighter:
i.e. a Prev Day: S5=76.46 S4=78.51 S3=79.99 S2=82.04 S1=83.52 P=85.57 R1=87.05 R2=89.10 R3=90.58 R4=92.63 R5=94.11 On very rare occasions the previous day's will work twice (something to remember when your source fails).
If you are still around for the Open (lucky dawg) then the opening price inserts into your R/S, and the closest R or S becomes the Pivot. R1 becomes the letter-number above and, S1 is the letter-number below. Your Moving Averages rarely offer Support or Resistance but are often used to visually spot Joe Sixpack's stop losses and will prepare you for the conclusion the once/day guys are going to assemble. The patterns mentioned above will apply to the newly reset numbers so, unless there is strong news, you can set your stops and go to work.
Previous day HOD and LOD are regularly used as entry points by Daytraders during the day, but the reason they are important today is because TASR had a wr7 day. Unless a trade has gone amazingly in favor of a Daytrader, they will not hold over night. In today's action, every trader in the world might have held some TASR overnight, hoping for a follow-through tomorrow; hence the Widest Range in 7 days (wr7). The day after a wr7 I look for two things: 1. the overnight high and the overnight low on the appropriate Futures, and a gap up or down for TASR at the Stock Market's open.
Even though you are looking at TASR, you want to watch the Futures on the appropriate Index because you have three chats to access: i.e. The ESM4, the $SPX Index, and SPY. Take note of the overnight Futures High and Low compared to the Opening price of the S&P. If the Futures opens at either the overnight high or the overnight low, or immediately goes to the high or the low, then there is an 80% chance that the open is the high or the low of the day. Either the Index will stay above the open without a violation or it will stay below the open. You should be able to tell within 10 minutes. Therefore the Open becomes your stop loss.
On the wr7, we LOOK for a gap up or gap down and then buy or short it back into the Previous Day's HOD or LOD. That becomes our target and when the price passes our target we set our stop loss at that target. Hopefully the price will continue in your direction and close without coming back. (A scalp becomes a good trade.) BUT, most of the time you are going to get the scalp.
On a normal day, the overnight position will lead to an equal hedge at the Open which turns to a scalp, and then the stock continues for a follow through. The aggressive Traders are checking the time&sales in case they want to reverse at the target-turned-scalp... a hat trick.
Inversely, the reason you have watched the overnight Index Futures is to determine if the Index and you stock is going to gap and run. You should have already looked up the Beta and how much it has moved against the S&P:
TASR Beta=3.65 chart up 186% against S&P (YTD). A conservative statement would say, "TASR is at least 265% more volatile in the direction with the S&P." So if your Index is going to gap and run; chances are your stock is going to gap and run too. Buy the open and set a 2% or a 6% stop loss, just in case one of the Brokers tries to get on CNBC and smash the stock in order to get one of their funds in or out. If you are trading every day, you should be wise to their disguise. You should also be wise enough to know that CNBC's retirement is heavy into bonds this year, and Maria is married to a Hedge Fund. Consider them the stock anti-rally network.