September 20th

I was watching the markets for a couple hours as I performed some other duties here at my desk. First trade was a short during a two-candle pullback during the 1:00 - 1:40 pm minor trend down. I saw bid/ask getting squirrely so I exited. About 10 seconds later, the price really dropped and kept going for another ten to twelve minutes. I missed that one... scared out by a signal that was not one I normally would follow. No matter, I'll take the good from it; I properly recognized then paper-traded an intra-trend pullback in the direction of the primary move. Something I have struggled with over the many months I have been practicing. I attended to some work then but kept and eye on the charts. I then was involved in an important call about my home heating system when I noticed the explosion in price after the FOMC meeting. Wow... I paper-shorted into the big 2:15 candle, blending a few entries for a good price and awaited the expected drop. It came and I covered for some winners.

I watched instead of playing, looking at some nice movement... then shorted into the decent sized 2:35pm candle. As expected, price broke down and I covered for some more gains. I ddn't play anything more through the consolidation phase that followed. Then, I had to deal with a sick kitten, our Maine Coon Cat we got in late July. A 4:00 appointment with the veterinarian revealed a high likelihood of the virus FIP. The tests should be back by Friday but we suspect it to be the illness. Incurable and fatal, it looks like little Gus will have to be put-down by the week-end. So, it's turned out to be a sad day here at bluecollar central.

A recent paper-trade, Redux

Last Wednesday, I posted the results of my swing-trade in GS. this is a redux of that trade with an eye toward the Technical Analysis phenomenon of "filling the gap." My recent discovery of Austin P's blog at coiledmarkets.com has re-awakened my interest in this market tendency. He emphasizes it in his analysis.

(Please note that he is selling a subscription/service and you should keep that in mind if you choose to visit there. I am not a subscriber and have no intention of signing up)

With this in mind, I revisit my GS trade mentioned earlier. The left chart is a screen shot of my trade timeframe but extended slightly to include later parts of the day that I closed out my paper-trade. (For chart simplification I have removed all the lines which indicated my blended entry prices and my exit point). The lower Magenta-colored line indicates the close on September 10th before the GS gap open on September 13th. On the 13th, GS stayed up above the gap. On the 14th, it gapped down and then traded in a range all day. However, on the 15th traders gapped it down again, taking it to the point marked by the first magenta arrow... Interestingly, the very point it had to hit to "Fill the Gap" from the 10th-14th of September! From there, it touched the same spot one more time a short time later then popped up for the rest of the day. Where did it go? It rose to fill the gap from the day's open, indicated by the second magenta arrow on the chart. It rose a bit above the gap fill point later in the day before dropping again on the 16th (not pictured on the chart).

Austin P pays particular attention to traders' proclivity to fill gaps eventually, using it increase his probabilities of nicely sized winners.

I think it would be a misuse of this idea to "predict the future behavior of a stock." But what study of this phenomenon can yield is a view into the collective mind of traders and give us another "inflection point" to watch; to learn from the behavior of price as it approaches these gap fill areas. They seem to provide support and resistance spots of particular interest to day-traders and swing-traders alike.

Watch and learn.

September 16 - Thursday

I started a nice work project yesterday and had to meet an employee at noon. This didn't leave much time for me to practice-trade. I logged on from approx 10:00 am and was getting whiplash watching the 5-min candles toss and turn. After the short push up that didn't follow-through at 10:45 am, I had the feeling that the markets were going to drop... I took a paper-trade short just before the beginning of the 11:00 candle, knowing that I would have only a couple candles of face time on the computer before having to go to work. I covered a few minutes later. As it turns out, I had a nice spot to enter... price continued to fall away from my entry and if I were using a stop loss over 7 cents, the trade would have held. It was a one dollar gainer before the consolidation area at 12:15 - 12:30 pm.

Based on my past performance, it is unlikely that I would have held it long enough to reap that reward, but based on my entry point, it certainly was within my grasp.

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It has been frustrating to not be able to commit any meaningful amount of time to my market practice over the past months. My day-job has a seasonal component to it and the fall is often a slower time for me. I am hoping that I will be able to do more paper-trading going forward. In my last post I indicated that my computer time will be limited over the next couple weeks, based on the work activity I am experiencing. I still think that will be the case.

No market time today, Friday the 17th, as I am with a customer all day and wrapping it up sometime Monday.

We do what we must until we can do what we want. A little practice is better than no practice and quitting is never an option.

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Good trading to all.