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I cannot stress the importance of sound and disciplined trading during these times of low volume, market chop, and pre-election blues. Since joining as a contributor to Shareplanner.com, my goals are to post analysis on day trading and discuss many of the strategies I personally use as a full-time trader, researcher and consultant.
Despite the fact that intra-day trading has been much slower than usual, I can still count on several key set-ups. Two weeks prior was a prime example. Just as things appeared boring and I was getting ready to grab my 3rd cup of coffee, there it was on a $KORS intra-day chart. It was like a ghost in the stormy night when I least expected it.
This set-up is a Sven Golly Seminole Short pattern, legendary in the Wall Street Nole camp. I might typically see this pattern once a week in normal market conditions, but it had been at least month. In the picture, you will see a massive shooting star candle followed by a bearish engulfing pattern. Despite the uptrend, these bearish candle formations signify that the longs could be exhausted.
It’s a great setup but what about market conditions and low volatility? Doesn’t that make the trade more dangerous? Because I have researched the effectiveness and am very familiar with the pattern, execution of shorting this stock is second nature. The uncertainty of market conditions is overshadowed by the confidence in the trade. I understand the risks at high of day and would therefore enter the short at a confirmation level several cents below the bearish engulfing formation. I would be risking .50 cents or .95 tenths of a percent in order to gain at least 70 cents or about 1.3% of the stock value. The trade works perfectly as sellers come in hard negating the move above $54.
It’s looks easy on paper and the reality is that day trading can be easy. With thorough analysis and an army of back tested data, I create a sense of relief knowing that over time this trade will not only create more winning trades than losing trades, but also give me a favorable win in terms of risk and reward.
So, the next time the market gives you a headache of confusion, just let her know who’s boss. That’s right mother market, “I am dangerous!”
