Home
Up
New Page 10

Co-brand Partnerships

award-5.gif (6517 bytes)

topsite.gif (1668 bytes)

webfifty.gif (6027 bytes)


 
drop_center.gif (2753 bytes)


wpe1.jpg (2095 bytes)


FREE EMAIL
Email Login
Password
New Users Sign Up!
 
MAILING LIST
Sign up for our weekly e-mail newsletter!
Tell Me More!

Enter your e-mail address
subscribe
unsubscribe
NEWS SEARCH
WEB DIRECTORY
WEB SEARCH
 CITY GUIDES
search by:
 WEATHER

Current Weather
Enter Your City, State, or Zipcode:

   

MASTERING
THE TRADE

ORIGINAL, INTERACTIVE SEMINAR ON TRADING USING
TECHNICAL ANALYSIS
 

 
EARNINGS ESTIMATES

Enter Symbol

U.S. QUOTES

Enter Symbol:

U.S. CHARTS

Enter Symbol:

TECHNICAL OPINION

Enter Symbol:

CANADIAN CHARTS

Enter Symbol


 SEC FILINGS

Search For:
 

Company Name
Ticker Symbol

 BROKER RESEARCH
Exclusive Broker

Research
Enter Ticker

 

 

 

The Traders Wheel
10/24/99 by Alan Farley

Pullback Day Trading

A stock you follow takes off and trends sharply. But you miss your entry and watch in frustration as it clears one hurdle after another. Finally it stops and reverses. As it pulls back on your 5-min chart and Level II screen, you have to decide whether or not to join the action.

Predicting price movement when an intraday trend pulls back requires both skill and patience. Some corrections persist or roll over into ranges that empty trading accounts. But others quickly bounce and take off to new highs. How can you tell which outcome is more likely?

The first pullback from a breakout has high odds of rapidly ejecting in the direction of the new trend. But watch the depth of the correction. If it breaks through several minor support levels before reversing, sellers will likely emerge when price tests the short term high. This common scenario will still produce good trades. With enough reward between your entry and the short-term high, you can place a sell order 1/16th or 1/8th below the top and ride the bounce into a quick fill.

Use a 6-Out rule to measure trend pullbacks. Start your count with the first bar lower than the parabolic extension of the trend. Watch for a pullback at the same angle as the trend itself or in a tight sideways pattern. The next trend leg should begin no later than the 6th congestion bar.

Why does this work? Many day traders set their short-term chart indicators to periods that measure 5 to 8 price bars. 6 bar corrections will often reflect short-term support at these common settings. If price does not eject, the next bar can signal a trend change and trigger waves of reflex selling by this fast-finger crowd.

Keep in mind that markets often move in 1-2-3 patterns. Countertrends follow a natural tendency to pullback, bounce and then pullback again before finding support. Traders often fool themselves by jumping on the first bounce rather than waiting for the corrective move to unwind. The deeper a stock corrects, the less likely it will take out the old trend high and break into another wave. For this reason, only tight and small 1-2-3 patterns signal new trend movement.

Use a short-term oscillator, such as Stochastics, to measure an intraday rally’s duration. After each price thrust, odds decrease that the trend will continue. Oscillators measure the depth of this overbought condition and provide early warning when a pullback lasts too long. Set these indicators to watch the same signals that other traders use to make their decisions. Then plan your trades to step in front of their reactions.

Moving averages and Bollinger Bands measure how far price should pull back before reversing in the direction of the trend. Notice how this NXTL intraday trend repeatedly bounces at the 8 bar MA. Trends tend to find support at similar levels on each correction. Use Moving Average Rainbows to identify the right settings for each unique pattern.

 

 
Alan Farley is a full-time trader and author residing in Denver, CO. He publishes The Hard Right Edge premier web site for trader education, technical analysis and trader resources featuring both Morning Trader and Traders Workshop. The site provides traders with comprehensive resources including original tactics and strategies on multi-trend technical analysis and short-term trading .

  Alan also authors on-line training technical analysis in association with independent sites. His most recent publications include the Mastering The Trade on-line workshop, Momentum: Riding The Tiger, and Time of Day. In addition to writing, he is an outstanding speaker and lecturer on short term trading strategies.

 He has been featured in Barrons, Smart Money magazine, Tech Week, MoneyCentral and TheStreet.com.

 

 

 

 
Search for it at the TulipSearch Open Directory
Investment Bookstore Investment Newsstand Market Mavens Report

TULIPS AND BEARS NETWORK SITES

 

FINANCE
Tulips and Bears
Contrarian Investing.com
Internet Stock Talk
Traders Message Boards
Traders Press Bookstore

NEWS AND INFORMATION
TulipsWeather
Freewarestop.com
TulipsMail
TulipsEspa�ol
TulipSearch
TulipNews
TulipCards
AllMusicSearch.com
City Guides
Travel Center
Bargain Bloodhound

WEBMASTER TOOLS

BecomeAnAffiliate.com
TulipDomains
GoSurfTo
TulipStats
TulipHost...coming soon
TulipTools...coming soon
...coming soon




Questions or Comments? Contact Us

Copyright � 1998-2002 Tulips and Bears LLC.
All Rights Reserved.  Republication of this material,
including posting to message boards or news groups,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited.  'Tulips and Bears' is a registered trademark of Tulips and Bears LLC


Last modified: April 02, 2001

Published By Tulips and Bears LLC