For my own benefit and possibly that of others I'm going to try to dissect some of Tim Sykes amazing video lessons and apply them to a similar stock and setup in order to be able to better apply his lessons to my trading.
The format will also help to distill the indications and contraindications of each setup in order to increase the real time analysis of a potential play. As they say preparation is key.
I'm only two months into this so hopefully this can also serve as a record of my journey to becoming less of an idiot trader. Any feedback would be welcome. Thanks and enjoy.
P.S some of the images will be pulled from tim's videos and some will come from my own sources.
video lesson 2154-2156 DIP BUYING
It is great risk reward to Dip buy a recently strong stock, entering in near strong support, that is dropping due to an inefficient market mechanism - in this case stop loss triggering when the stock could not break out to a new high (note the double top) and everyone’s stop losses getting triggered.
Notice with NXTD - the thesis was that it could break out at 2.87/2.90 but when it didn’t that caused the price to fall and caused people’s stop losses to get triggered. Note that when this happens volume increases but then fades as the price rebounds.
Time frame - Early am - market open possibly slightly delayed from market open.
Hold length - short, there's no guarantee that the price will continue to climb or that it will not drop after the bounce.
Indication - recently strong price action with a potential to break out of a key level. Then failure to do so causing a big drop from high, bottoming near support.
Contra indication - When they break out of key level. When there is actual bad news to cause the drop. When they break support on the drop. When they don’t bounce off of support
Look at this panic from MRTX as a delayed AM panic today 9.19.2017. From 11.50 to 10.70’s with a bounce back to 11.20’s.
This is a 1 minute chart:
Notice how the drop and rebound correspond to increasing and then decreasing volume making me think the rebound is a course correction.
Look at how it held around that blue support line.
And here how it failed to break out past 12.
MRTX isn't as perfect as NXTD but the similarities are fascinating.
Posted Sep 19, 17 12:12 PMbythenewkids
Categories
Price Action: Buying Dips/Panics
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