Thursday, February 08, 2007

What Goes Up

Must come down – first a picture using the 2-hour charts of a stock entering earnings.



The point, of course, is that a Blow-Off Top or BOT is the exact opposite of The BOB. And you can see it on a lot of different time frames. And after a BOT what happens?



I’ve mentioned before that I like to use the 2-hour charts to set up trading candidates. The way I do that is by this process – I use Stockfetcher to find a list of 10-day lows tailored to my specifications. This is easy because one of the ready-mades provided by Stockfetcher gives you the basic filter and all you have to do is make some modifications. For example I want a specific price range and a specific average volume and a specific Average True Range. It takes a matter of seconds to mod the ready-made and run it and output a symbol-download to a CSV file in Excel. I dump that list into a prophet.net watch list and then use the two-hour charts to look for, well, BOB, of course, but also dummy spots in the final half-hour of trading and so on. “Final half-hour”? Yes – you see the neat thing about 2-hour charts is that in the trading day there are only three complete 2-hour blocks and the last block is only 30 minutes. I don't know if that is neat or not but that last 30 minutes can give you a world of information about the next day if you are willing to put in the time to study it.

I use the 10-day lows because they are not so beat up that they might even have a day or two of recovery and I am looking for day-trading candidates not a life-long relationship.

Using the 2-hour charts to sort out the list looking for candidates has the added advantage of providing a stronger set-up and that is always beneficial.

7 comments:

Red Hue said...

Morning Marlyn,

I was wondering what you meant by "dummy spots" in the last half hour?

Rich said...

Nice setup. I'll add you to my favourites on technorati. Check out my trading blog here if you'd like to see my trades and commentary.

Marlyn Trades said...

A "dummy spot" is actually a narrow range candle - what we call a "DOJI" in 'stick-land. Someone started calling it a "dummy spot" because even a "dummy" would understand its significance. I liked the term and being a dummy I started using it. If I remember I'll make a post.

Marlyn Trades said...

Rich - thank you. I looked at your blog and it meets my basic requirements for originality and frequency of posting. Thus I will add you to my blogroll this evening.

Keep up the good work - I like ETFs.

Bullish Jim said...

Marlyn- are you watching CRVL today? What a bloodbath! I've been watching it for a BOB but it just keeps falling and falling. Even if the BOB comes I'm not sure I'd have the courage to buy it!

Bullish Jim said...

Funny! It appears you were writing about CRVL when I made the above comment. Great minds think alike I guess...

QUALITY STOCKS UNDER 5 DOLLARS said...

Must come down.