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Short Term Momentum Trading Presented to: Fairfax County Active Traders Meetup Group Presented by: Bill Hider N3RR @ ER

Short Term Momentum Trading Presented to: Fairfax County Active Traders Meetup Group Presented by: Bill Hider N3RR @ EROLS.COM November 12, 2009. DISCLAIMER

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Short Term Momentum Trading Presented to: Fairfax County Active Traders Meetup Group Presented by: Bill Hider N3RR @ ER

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  1. Short Term Momentum Trading Presented to: Fairfax County Active Traders Meetup Group Presented by: Bill Hider N3RR @ EROLS.COM November 12, 2009

  2. DISCLAIMER Nothing in this presentation constitutes investment advice, trading advice, stock recommendations or any other advice or recommendation(s). Mr. Hider is not a broker, investment advisor, or financial advisor. In this presentation, Mr. Hider is presenting a description and explanation of his trading experience, process with examples and his opinions. No advice of any kind is given or should be implied.

  3. Short Term Momentum Trading • Short Term: • Day Trades in/out in less than one day • Swing Trades in/out in several days • Momentum Trading: • Identifying, then following, the Trend; AND • Entering/exiting positions based on the movement of the price of certain equities where that price movement is caused by others.

  4. What do I trade? • Buy To Open/Sell To Close Stock options on Stocks and ETFs that (generally) have these characteristics: • 1. Optionable • Options must meet my options criteria (discussed in another presentation) • Stock/ETF trades >= 1,000,000 shares/day (avg 30-day) • Average daily trading range (5 days) of >= 2.0 (with some exceptions) • Pass my momentum scan filter criteria. These are, generally, the “leader(s)” in their sector and have a “smooth”, repeatable/dependable price pattern.

  5. My Trade Entry Process • Using yesterday’s closing prices, identify the Trend of: SPX, NHNL • Find stocks from yesterday’s closing daily chart that have price graph continuation/reversal patterns (bullish or bearish) and/or candlestick continuation/reversal patterns (bullish or bearish) in the direction of the Trend. • Identify tomorrow’s entry price from daily chart. • Select (potential) Option to purchase tomorrow. • Tomorrow, use the 5-minute chart to identify candlestick/price graph continuation/reversal patterns that match trade entry criteria (above). • Be sure S&P criteria for trade entry are met and enter the trade if the Stock/ETF entry criteria are met.

  6. I Started Learning this System in June 2005

  7. How Do I define A Trend? (Slide 1 of 2) 1. Stock is above 10ema, bullish 2. 10e, 20e, 50e are aligned as shown, bullish 3. Stock is below 10e, bearish 4. 50e, 20e, 10e are aligned in that order, bearish

  8. How Do I define A Trend? (Slide 2 of 2) 1. Stock is above 10ema, bullish 2. 10e, 20e, 50e are aligned as shown, bullish 3. Stock is below 10e, bearish 4. 50e, 20e, 10e are aligned in that order, bearish

  9. Swing Trading A Trend Enter when stock bounces off 10e Exit when stock breaks yesterday’s low (bull) or high (bear) NOTE: On this 2-month Daily chart, the 10e, 20e, and 50e lines are running almost parallel. This is another indicator that a trend is in place.

  10. Day Trading A Bearish Trend FSLR 1/1/09 to 3/4/2009 FSLR: Bearish breakout, Sept 2008 Consolidated & broke down again in mid-Feb 2009. See next slide.

  11. Day Trading A Bearish Trend – FSLR 3/4/2009 FSLR 3-4-09 Retraced to the 10e and bounced off 10e bearish. ENTRY on 3/5 IF FSLR drops below idl of 110.82

  12. Day Trading A Bearish Trend – FSLR 3/5/2009 5-Min chart FSLR 3-5-09 Gapped down at the Open. 4th candle (9:45) bounced off 5e, then consolidated with three Dojis, possibly forming a Falling 3 Method candle pattern. 10:05 candle completed F3 pattern – ENTRY @ 109.79 – BTO 10cx QHBOB @ 7.95 10:13 EXIT @ 108.64 – STC 10cx QHBOB @ 8.4 Profit = $450.00

  13. Day Trading A Bearish Pattern of a STRONG Stock– GOOG 3/4/2009 GOOG 3-4-09 Daily Chart Riding the 5e down on increasing volume (bearish). Bearish entry below idl of 315.38

  14. Day Trading A Bearish Pattern of a STRONG Stock– GOOG 3/5/2009 5-Min Chart GOOG 3-5-09 5-Min Chart Gapped down at Open. Retraced & filled the gap. ENTERED @ 9:51 as GOOG broke below lower BB and out of rectangle pattern. BTO GGDOT @ 8.10

  15. Day Trading A Bearish Pattern of a STRONG Stock– GOOG 3/5/2009 5-Min Chart GOOG 3-5-09 5-Min Chart Gapped down at Open. Retraced & filled the gap. ENTERED @ 9:51 as GOOG broke below lower BB and out of rectangle pattern below idl. GOOG @ 314.02, BTO 10cx GGDOT @ 8.10 EXITED 9:54 GOOG @ 312.31. STC 10cx GGDOT @ 8.70 Profit = $600.00

  16. Day Trading A Bullish Trending/Breakout Pattern AAPL 3/20/2009

  17. Day Trading A Bullish Trending/Breakout Pattern AAPL 3/20/2009 AAPL Broke out on 3/11. Completed Rising 3-Method pattern on 3/17. Formed triangle & possible breakout above double top pattern on 3/20. Entry is above idh 103.11 on 3/23 if SPX bullish. NOTE: the 10e, 20e and 50e are now aligned in bullish trending pattern for 1st time this year.

  18. Day Trading A Bullish Trending/Breakout Pattern GS 3/20/2009 GS In trending pattern. The 10e, 20e and 50e are now aligned in bullish trending pattern Retraced to the 10 on 3/20 Entry is above idh of 100.50 on 3/23 if SPX bullish. ENTRY Pattern I am looking for is a bullish engulfing candle on 3/23 OR bullish gap to enter above 100.50.

  19. Day Trading A Bullish Trending/Breakout Pattern SPX 3/20/2009

  20. Day Trading A Bullish Trending/Breakout Pattern SPX 3/23/2009 5-min Chart SPX Ran up at Open. Formed potential Bullish Flag Pattern on 9:40 – 9:55 candles. Completed Flag pattern on 10:00 AM candle. And signaling we’re off to the races!

  21. Day Trading A Bullish Trending/Breakout Pattern AAPL 3/23/2009 5-min Chart AAPL Gapped up at Open. Broke up above rectangle pattern @ 10:00. I ENTERED @ AAPL = 103.96 @ 10:05 BTO 10cx QAADT @ 7.40 NOTE the tight Bollinger bands at yesterday’s close and the subsequent BB Expansion this AM – Bullish. 11:38 AM Exited STC 10x QAADT @ 8.00 Profit = $600.00 .

  22. Day Trading A Bullish Trending/Breakout Pattern GS 3/23/2009 5-min Chart GS Gapped up at Open. Broke up above rectangle pattern @ 10:05. I ENTERED @ GS = 104.29 @ 10:09 BTO 8cx GSDT @ 11.50 NOTE the tight Bollinger bands at yesterday’s close and the subsequent BB Expansion this AM – Bullish. 11:45 AM Exited STC 8x GSDT @ 12.70 Profit = $960.00

  23. Let’s Look at Some Trading Rules I Use • Enter the trade per criteria described earlier, but only on the 1st day or 2nd day of the initial “MOVE”. • A MOVE is a reversal bounce off support or resistance or a breakout above resistance or below support. • If the price breaks through a moving average that was previously resistance or support, or breaks out per # 2 above, the “day count” reverts back to #1.

  24. For Example the AAPL Trade If AAPL breaks above resistance and out of the triangle tomorrow, that would be Day #1 of the MOVE.

  25. For Example the AAPL Trade, the Next day The Day Number of THIS trade is sitting at DAY #1. If tomorrow, AAPL breaks above today’s idh, or completes a bullish continuation pattern over multiple days, that would be Day #2 of THIS MOVE.

  26. Indicators I Use • Price graph with 10e, 20e, 50e moving averages; Cash Flow, Volume • Bollinger Bands (2), 20 Simple moving average, 10e moving average • Price graph, DMI +(28,F) and DMI – (28,F) , ADX (7, T) • NHNL (calculated after the close, daily) plotted as an oscillator • Long term chart (4 years) with 50e, 100 simple and 200 simple moving averages • The price graph trumps all other indicators. Those other indicators are for visualization of various situations pertinent to identifying and trading the trend.

  27. Let’s Look at the SPX Chart 1/09 to Today Note the Difference Between Mar to July and July to Now Jan – July: Choppy July – Now: Trends for 1 month or less, retraces to below the 20e or 50e. And Note that it trends at the 5e, not the 10e. That means the moves are volatile.

  28. Even So, it Looks Nothing Like This One

  29. Let’s Look at the VIX Chart 3/05 to Today 3/05 – 8/07: 10 to 20 1/09 – Now: 20 to 56 That means the moves are volatile.

  30. In July 2009, The SPX Broke Above the 200 day Simple Moving Average

  31. So What? How to Visualize Entry Pattern in the Face of High Volatility Moves - Examples.

  32. So What? How to Visualize Entry Pattern in the Face of High Volatility Moves - Examples.

  33. So What? How to Visualize Entry Pattern in the Face of High Volatility Moves - Examples.

  34. So What? How to Visualize Entry Pattern in the Face of High Volatility Moves - Examples.

  35. So What? How to Visualize Entry Pattern in the Face of High Volatility Moves - Examples.

  36. Stocks - Examples That I Trade/Monitor

  37. Trade Management – I Discussed this last Month, and Here’s the Write up on it. My stop setting using "the low of day on the entry day" and "the low of the previous day" for subsequent days.  When the stock breaks the low of the previous day, I get out stopped-out.  Usually, in a trend, the stocks that I trade will run in the trend direction 2 to 5 days, or more. I do not make my stop loss orders effective until 10 AM (the earliest I can make them automatically trigger after 9:30 with the trading platform I now use), allowing the stock to move around a bit during the first half hour of the day.  I also watch the stock during this time if I need to take control of the trade immediately. My entry and exits are determined on the daily chart each evening during my homework.Look at IBM for a trade entry on 10/5.  On 10/2, IBM pivoted bullish bouncing off the 50 ema. That evening I set an alert at the 10 ema, 119.57, above and as close to which I would enter a bullish trade on IBM, buying IBM calls on 10/5. The next trading day, 10/5, IBM initially dropped and put in a low of 118.13 (which would ultimately be the low of the day) and then a trade entry setup pattern occurred on the 5-minute chart @11:01 am as IBM broke out above 119.57. I entered IBM bullish (buying call options) at IBM = 119.65 on 10/5.  I set my initial contingency stop order at the (current) low of the day, which was 118.13.  IBM never went lower than 119.15 on 10/5 after I entered the trade.  But look at where it is now = 127.04.  Throughout the current run, IBM never broke its low of the previous day.  As of 10/12, this IBM trade is up over 7 points.On 10/5, I also entered trades on AAPL and FCX. Take a look - similar entry and stop strategy.Note on my FCX trade, at the close of 10/5 (entry day), I was underwater, but not stopped out, so I remained in the trade.Those trades are typical of what my swing trading strategy looks like.

  38. Technical Analysis Reference Material to Study Candlestick Charting Explained, 3RD Edition Gregory L. Morris with Ryan Litchfield If nothing else  Read Chapter 10. It’s 79 pages of GREAT STUFF Bollinger on Bollinger Bands John Bollinger Short Term Trading in the NEW Stock Market Toni Turner Or any of her other Day Trading Books

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