Trading the Extended Intraday Run

Nov 18, 2014: 3:52 PM CST

How do you trade run-away markets?  Very carefully!

Let’s chart the intraday stock market action and focus on a kindergarten-simple strategy that beats virtually all others when the market forms these sort of creeping-trend patterns.

With the market overextended and negatively divergent into resistance, logic and most strategies suggested odds favored a retracement lower.

However, the alternate “unexpected” thesis planning called for a strong breakout on a trigger to new highs, which would be generated by another short-squeeze and stop-losses triggered by the bears.

We ALWAYS plan a logical/dominant thesis and then buffer it with an equally plausible alternate thesis to be objective and allow us time to adapt to real-time market changes.

That’s what I repeatedly stress and teach to members of the Premium Strategy Planning reports each night.

I also strongly highlighted this “violent, upside break” potential in this morning’s Market Briefing with TradeStation.

Our plan often calls for larger price movement to occur IF the alternate (unexpected) thesis triggers.

That’s because a lot of traders will “do the right thing” according to logic and then wind up trapped, forced to cover losing positions quickly.

That’s how Trend Days like this develop and sustain themselves the whole session.

So how do you trade these rare but real events as they develop? It’s actually so simple – yet hardly anyone does it.

Here’s the same chart with all the clutter and irrelevant information removed:

As I stress to members, in these rare breakout events that create Trend Days, you should focus your attention on price and its relation to continuously rising moving averages.

In this case, I’m showing the green 20 EMA and the blue 50 EMA on the 5-min intraday chart.

What do we do?

Simply buy pullbacks/retracements that touch or test the rising 20 or 50 EMA.

You can also wait to trigger your buy signal on a break above a falling “flag” trendline.

Target at least the prior high (exit on touch) or hold for a slight movement above the prior high as the trend continues (exiting on the break under a rising trendline).

Trail your stop under the 20 EMA and repeat this process as long as price continues trading higher (meaning, stop buying pullbacks that trade under the 20 and especially 50 period EMA).

The more you think about it, the more you’ll hesitate, and the fewer trades you take.

If you think too much, you’ll even short the market and will CONTRIBUTE to the upside action when you eventually stop out at a higher level.

During rare but real events like this, follow price… and nothing else.

Simple strategies work.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

2 Comments

2 Responses to “Trading the Extended Intraday Run”

  1. Greg Says:

    Yes we could trade in there but one thing that has to be made sure and that is we use strict money management because you simply can’t trust Forex market, it can go wild and we might not be able to take the best seat, hence better to have safety measures before than later. I am working with a brilliant broker that OctaFX is and they have very supportive service with ideal offers which includes the 50% bonus on all funds that I deposit and also qualify customer service.

  2. Salvan Says:

    We need to be careful on this, as sometimes this type of
    extended run can continue, so we should be careful if we go against it. I work
    with very simple approach of entering when I am 100% sure, I really like this
    blog due to their consistent reports that helps me work while working with
    OctaFX broker too has boosted me fair bit given they got highly qualified team
    of experts providing daily market reports, it’s simple to follow yet quite
    effective.