Don't know about you but I'm starting to see some very nice shorts setting up. You'll find all the information you need on each individual chart.
Well things are going as planned as I assumed that right from the get go we would start to see instantaneous gains from our position but unfortunately that hasn't been the case. Lets first take a look at the 1 hour 5 day chart to get a better idea of where we stand.
As you can see from the above dashed lines we are obviously making a series of lower highs and lower lows over the past 3 trading sessions. Never a good a thing when you're a bull. However, on the brighter side, the thrust of the downward move has begun to shrink. Also, in the same chart below you'll see I highlighted a doji bar. This bar is significant because its a battle between buyers and sellers where buyers are coming in and soaking up the excess supply. Now technically we could move our stop up to that level but I'm going to keep it where we originally placed it and thats 47.06.
I still think and feel that this trade will work out. If it doesn't we're left with a small loss in a low risk trade and that's the name of the game.
Til next time.
First and foremost this blog is going to be dedicated to risk management. Sounds boring right? Not really! This is what's going to make you money. This is going to give you the opportunity to preserve capital in those times when you're not trading so well. We all go through cold streaks. We all make mistakes. Having rules in place to limit the severity of those mistakes are going to keep your bankroll fatter and keep you in the game longer. That's what it's all about right? Making money.
Without further ado I'm going to introduce my first stock pick that I believe is a LOW risk HIGH reward play that I believe is going to add to our bank roll. That stock is Foot Locker. Ticker symbol FL.
As you can see from above I like to work on three different time frames. I do this because each time frame gives its own picture of what's going on. My times frames are weekly, daily, and 1 hour - 5 day chart. I believe this works best for me but you can use whatever three time frames you feel most comfortable with. What I'm looking for is confirmation on all three time frames. In the case of FL, which I want to go long in, you can see the trend is higher on all three time frames although you could make the case that the one. hour time frame is in more of a sideways action. Nevertheless you are seeing supporting action on all three time frames. This looks especially noticeable on the weekly time frame where you're getting a close in the upper half with increased volume. Why this looks especially bullish is that the stock has a had a nice run over the past five weeks from around 44 to nearly 50 which constitutes a nearly 14% gain. With a gain like that you'd expect there to be some profit takes, especially in the current market environment we have been experiencing (chop city!). However, even with all the profit takers, there were new longs ready to step up and absorb that excess supply. Because of this I am willing to initiate a new position @ these levels with the opportunity to add more if it breaks the shaded area that I've highlighted on the one hour chart. However, I won't add to that position unless I see an expansion of volume and an expansion of range going through that shaded area. That will give me the confirmation of strength.
Remember, the most important thing is risk management and I have defined my risk 47.06 stop which is shown on the daily chart. Now its up to you to define how much money you want to risk. Most people I have read don't recommend risking any more then two percent of capital on any one trade. An example of this would be if I had a one hundred thousand dollar account I would only be allowed to risk two thousand dollars (100,000 * .02 = 2000). So this gives you the freedom to use all your capital on any one trade but it only allows you to lose two percent of it. I hope that makes sense. If it doesn't feel free to comment below and I will help you out to the best of my ability.
Hopefully this gives you a little taste of what I'm all about. In newer posts I will be focused both on individual stocks and as the market as a whole. Generally, as of this writing, I am neutral to bullish on the market. In the future I will include charts of the market as a whole since its always easy to trade in the direction of the market. Its best to not fight the trend in certain instances.
Until next time,