Intraday Trades for Thursday

Dec 20, 2007: 10:13 PM CST

Here is a sampling of the idealized swing trades that could have been taken for the index action (DIA) for Thursday, December 20, 2007. It was another “U-Turn Buy” day!

As always, the FIRST play (trade) of the day when the index (Dow Jones in this case) experiences a gap of less than 100 points is to FADE the gap, or trade against the gap with the initial target being yesterday’s close.

As you can see, this trade worked perfectly again today. This pattern is working extremely well in the current environment, as we seem to be having many reasonable index gaps that fill.

The second trade is to play in the direction of the initial gap (impulse), which actually was not as successful. In fact, the trade (trying to play/target the intraday highs) fell far short and resulted in a stop.

A nice bear flag (not highlighted) set-up which achieved its target quite rapidly. I missed this one totally. Someone said it best recently, “Bear flags are best seen in hindsight!”

As price began to drift slower downwards, a lengthy momentum divergence developed, where quick divergence ‘scalps’ were able to meet their target provided you had quick reflexes.

The prolonged momentum divergence set-up the potential for a ‘larger target’ or at least afternoon breakout, which occurred as price broke above key resistance at the 20 and then 50 period moving averages. I drew an arrow to highlight this.

This was also a “Trend Confirmation Zone” or “Sweet Spot” trade which could have been entered for a larger target on the day.

There were a couple of ‘up-swings’ which could have resulted in profits, but the highest probably trades. There was also the classic “Three Pulse” or “three push” pattern which accompanied the break (and confirmation of new intraday uptrend).

Study your favorite stocks and see what trades set-up according to your perception of market action today!

6 Comments

6 Responses to “Intraday Trades for Thursday”

  1. Ethan Says:

    Hi,

    I notice that you like to use momentum indicators to look for divergence between price and momentum. Would it be possible for you to share which momentum indicator and it parameter settings that you are using at the bottom of the charts? Thanks!

    -E

  2. Corey Rosenbloom Says:

    Hey Ethan,

    Absolutely. The indicator is actually the classic MACD on StockCharts.com, but set to the parameters 3, 10, and 16. It’s the difference in a 3 and 10 period SMA and then that value is smoothed for 16 periods (the red line). The difference is plotted as a black line.

    This indicator was developed by Linda Raschke and is known as the “3/10 Oscillator.” Unfortunately, StockCharts does not recreate the oscillator as Linda uses it (Linda plots EMAs instead of SMAs), but it mirrors it closely.

    Thank you for your question.

  3. jacksoo Says:

    Good morning Corey – what chance 3 days in a row with a gap strategy on the Dow – I guess the principle works equally well with any stock, perhaps its the percentage gap that matters, sub 0.75% maybe?

  4. Corey Rosenbloom Says:

    That’s right! Right now, what’s giving me the most success in trading is so simple. Classic gap fades and classic intraday bull and bear flags. I’ve built up so much confidence in these patterns.

    Right, it’s usually best not to fade an index gap greater than 1%. Allow stocks 3%. Beyond 4% in stocks gets lower probability from my experience.

    Anything greater than 5% and you’re best trading pullbacks in the direction of the gap, as there’s a greater probability of “Trend” for the day.

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