I like that JAZZ tune
Wednesday Recap:
CAEI – trade didn’t trigger. Continues to pull back on light volume, I will keep this one on the radar for volume spikes should the Chinese stocks that have been so hot recently, regain favor. I will also pay close attention to see how it acts if it continues to drift closer to its 9 dma.
JAZZ – exploded soon after the open, I got a small piece soon after volume hit at 3.75 and added more through 3.80. I was a bit disappointed it wasn’t able to fight through intermediate resistance at 4.10. This is the problem with trading biotech stocks off technicals. They often move so fast they invite in flippers and manipulation. This led me to flip some JAZZ to lock in a portion of the gain and I will give the rest a little bit of room to see if we can push through 4.10 and perhaps fireworks to take place.
Looking forward to Thursday:
The last trading day of a shortened trading week, I am expecting many traders to be away from the trading desk and volume to be extremely light. I doubt there will be too much action but trading usually takes a positive tone on the last day of a holiday shortened trading week. Tomorrow morning’s jobs report will likely set the tone for the market. I will be primarily spending my time managing open positions and refining watchlists for the coming week.
There is one low risk setup up that caught my eye, especially since it seems to fit quite nicely with the rest of ColmsUM.com.
UBET
YouBet.com is an online wagering company focused on horse racing primarily in the United States. The Company’s customers are able to wager on horse races at over 150 racetracks worldwide and receive the same odds and expected payouts they would receive if they were wagering directly at the host track and their wagers are placed directly into the track betting pools.
I am approaching this as a trade with a technical setup that I fancy although recent news and fundamentals have been positive and improving. The stock was also added to the Russell 2000 which will bring it back to many traders radar. At the same time this leaves me a bit skeptical here for the same reasons I mentioned last night involving the Russell reshuffling.
Anyway, obvious 1234 pattern, clear buypoint through 3.36 although I will be looking for a volume surge to pick up shares. Low Risk Stop out on a break of the 9 dma around 3.15ish.
I will also use this as an opportunity to further explain the 1234 pattern, one of the many patterns I look for in short-term technical trades since I am posting on a new site and not all you are familiar with my trading style. I also plan to stockpile more reference material over the weekend.
Poor Job report drving trade, not much to do except protect your capital. I won’t be forcing trades.
What a buzz kill
1234 pattern… definitely one of the best indicators for traders. For those of you who didn’t see, there is a small explanation of what it is on the chart image itself. Jax, since some of our viewers are 100% new to stock trading - how about a small explanation as to why the pullback days being light volume is very important. I’m not sure it’s clear to them that a high volume pullback day mixed in would not be good.
Well it depends on the bar in question but mostly it would yes, negate the 1234 pattern. Though I can think of at least a couple scenarios where a high volume “distribution” bar off a big move is seen as a huge positive and might offer sooner entry. Can anyone name any such occasions?
The primary thing to remember with the 1234 setup and the psychology the chart depicts is that you have a strong move on big volume (i.e. a lot of buyers of a stock at a certain level, for some fundamental reason, news driven etc. that clears recent highs). This move is followed by three days of “rest” where the stock allows short term traders to lock in recent gains. This consolidation also allows for a low risk entry into the stock at a lower price but still above resistance levels.
The ace in the hole for most of these technical setups is the fact that they are practically self-fulfilling prophecies. This is such a common pattern that traders key on that many traders are looking for the same move, so when the buy point is triggered a quick transition is made from a relatively equal supply and demand at the current price level maintained by the market makers, to a situation where demand far exceeds supply which results in quick appreciation in the stock price.
I think that is a pretty bare bones explanation of the pattern and should hopefully provide further insight on why you should key in on particular stock patterns; not only do the patterns highlight clear psychological underpinnings but they also act as self-fulfilling prophecies.