Trade anatomy

ININ, An Anatomy of a Friday Morning Daytrade
http://tradermike.net/2006/10/inin_an_anatomy_of_a_friday_morning_daytrade
--My preparation is my confidence in my ability to execute perceived opportunities according to my risk parameters.

Using the premarket top gainers/losers scan, I search the NASDAQ, NYSE, and AMEX market stalls for any tasty morsels and look for any stocks moving on the highs/lows scan. I also check Briefing.com and MarketWatch Newsfinder for news that has happened since the close of the previous trading day---identifying which stocks the market considers to be newsworthy is one of the many trading skills which can be developed.

In addition, I note via Briefing.com calendars such events as economic reports, earnings, Fedspeak, splits, upgrades/downgrades, and conferences. Usually, I have around ten to twelve trading candidates. Sometimes, there are none or a very small number. In that case, I patiently wait until the market has a new batch of fresh candidates---I will not make do with stale merchandise.

I list the stock symbols of my candidates and the important economic events for that day in my journal. Next to each stock symbol, I put the results of my basic Yahoo financial research---reason for price movement, float size, and short interest.

Discovering that ININ---set to gap up because it has given higher earnings' guidance---has a very small float and moderately high short interest, coupled with my knowledge that such stocks often move very strongly on low volume days, like Fridays, pre-holidays, and summer days, makes ININ the star
attraction at this stage.

I check the one-minute chart of ININ, and I see the choppy pennant being formed at 10 A.M. The pennant range is around .25. That's enough of a sign for me to buy half of my lot as close to the bottom of this formation at 13.65.

Triangles/pennants need to be not completely formed or else they usually just fizzle out and do not support strong breakouts. The pause in volume is what my trading buddy calls a lullipop, a lull before the breakout, where the equilibrium between buyers and sellers end and the buyers take over.

Part of my prepurchase research of ININ was its support and resistance based on weekly price level resistance. Since the open of the July 24, 2006 weekly, bearish, high-volume candle was 14.81 (see below), therefore trapping lots of traders at that level, I determined the resistance to be around 14.80.

My offer gets lifted fairly easily, and I am out with a $1.00 move gotten in about 40 minutes. Since the risk was .25 for the complete lot, it was a +4R trade. For quickly moving stocks, I will often forgo hard stops, but it is a risk because my net connection could be interrupted.

asr: risk is 0.25 , target $1 so it is 4R trade .. => R = reward/risk = $1/ 25 cents = 4

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Tools of the 'Trade' -- How I Work
http://tradermike.net/2006/06/tools_of_the_trade_how_i_work/

Filters I Use to Create My Universe of Tradable Stocks

For swing trade candidates I use the following criteria in TeleChart:

* Price Per Share: about $5 to Max
* 5 Day Average Volume: 75th percentile & higher (right now that works out to about 466,000 shares per day)
* Price Volatility: 25th percentile & higher
* Volume (Dollars) 5-Day: 75th percentile & higher

For day trading I'm trying to find liquid stocks which are abnormally active and volatile. To do that I use the following two scans in Trade-Ideas:

Bearish Scanner's Filter:

* Min Price: $10
* Max Spread: 10 cents
* Min Current Volume: 3 (stock is on pace to trade 3 times its normal volume today)
* Min Volume Today: 300,000
* Max Up from the Close: -0.5% (negative means down at least 0.5%)


Bullish Scanner's Filter:

* Min Price: $5
* Max Spread: 10 cents
* Min Current Volume: 3 (stock is on pace to trade 3 times its normal volume today)
* Min Volume Today: 300,000
* Max Up from the Close: 1%