Stock Traders Should Adjust for Wider Swings | 9.21.15

Prepared stock traders read between the lines. Scanning hundreds of stock charts gives you a feel and experience you can’t get any other way.

To become a pro you need to do the work. Actually, you need to do the work if you trade part-time too.

Today’s chart scans have a much larger number of short-sales than longs. The SPY broke the 4 week uptrend to the downside on double normal volume. The high-probability trades are to the short side.

Could the market trade higher? Yes, but good trader’s don’t second-guess their edge. Have a game plan with both longs and shorts but expect the shorts to have better follow through.

Many stocks are trading with a higher average true range as well. Prepared traders should adjust for wider swings. This means you should reduce your share size to risk the same dollar amount you were accepting when the VIX was in the 15 area.

Stock Market Today: Map of the S&P 500

(click the map for a full view)

Stock Traders Should Adjust for Wider Swings

Day Trading Game Plan: The SPY ETF Chart

SPY shooting star candlestick on double normal volume. A higher open this morning (6:45am) is a short-sale looking for a test of last Friday’s low as the first target.

(click the chart for a full view)

Stock Traders Should Adjust for Wider Swings

Stocks to Trade | Monday September 21, 2015

Pete’s Notes:

  • A lot of talk about uncertainty. Looks pretty clear to me. The stock market got hammered on big volume for a day and a half after the FOMC announcement.
  • A few stocks like FB, AMZN, UA, ATVI are solid longs but the size of those on the short-side has the boat leaning to one side.

Charts in Focus

Target Corp. TGT

Target setting up a clean short with targets 🙂 at $74 and $72. M broke major support last week as well.

(click the chart for a full view)

Stock Traders Should Adjust for Wider Swings


Stock Traders Should Adjust for Wider Swings


Earnings in play today > 1M avg shares:

Stocks that showed relative Strength– contra to the SPY Negative change from the open on 9/18/15: CYBR, IR, WPZ, ACN, VTR, HCN, VIAB, FEYE, FIT, ADBE, BMY, ABBV

Above the 20sma, up for the week and closed 2% higher from the open: (not necessarily all longs, but stocks to note for the price action of strong close from the open and above the 20sma): SINA, WDAY, VRX, XON, KITE, MAC, LNKD, ACN, BUD, VTR, JUNO, ENDP, HCN, VIAB, FIT, ADBE, BMY

Bullish Ideas ATR/Volume/Price: CAM, TAP, LB, RCL, LLY, TSLA, UA, AMZN, NKE, FB

Bearish Ideas ATR/Volume/Price: gpro, amba, qihu, wynn, cybe, intu, lulu, dltr, lng, cf, mpc, mon, hp, de, apa, wmb, pru, dg, bidu, clr, stt, pnc, dvn, nee, baba, twx, jpm, etn, gs, slb, lvs, kss, fslr, apc, ac, mjn, qrvo, cci, cof, stx, utx, cvs, cat, wdc<75, hot, tgt, xom

Weak Stock Weak Close: cf, schw, hp, apa, m, mos, clr, mrk, etn, do, lvs, apc, stx, ar, cat, wdc, hlt, ayn, bbby, hpq, wfm, sndk

Strong Stock Weak Close: LLY, CAM, CCL, NFX, GOOG, GOOGL

Weak Stock Strong Close: abbv, bax, cpgx, cybr, ete, ir, lng, mmc, symc, wpz

Strong Stock Strong Close: BMY

20 day Breakdown: abb, cf, joy, ip, m, dd, stx, mos, hst

20 Day Breakout: ZG, NAT, IDTI, P, HZNP, AZN, VIAB, ADBE, BMY

2x Normal Volume: ABBV, MRK, BMY, ADBE, PSX, FEYE, LLY, HD, MDT, WBA, STX, NKE, HCA, MAR, DE, ETN, WDC, MMM, GS, DLTR, KSS, NEE, INTU, HCN, GOOG, STT, LB

Watch List Longs: BBY, BMY, BRCM,

Watch List Short: swn, met, abt, pru, bk, mrk, ms, pnc, bac, wfc, jpm, slb, kss, all, cof, wmt, adm, cvs<99, tgt, jnj, xom, wynn, intu, m, nue, c, dd, qcom, lvs, csco, orcl, emc, vz, hpq, sndk

Inside days: nee, lly, paa, fb, unh, terp, grub, hfc, pld, duk, peg, amzn, d, mdvn, vlo, cms, aal, stwd, atvi, ual, scty

How Stock Traders Should Adjust for Wider Swings | 9.21.15

As the VIX moves higher, the swings in your stock will increase. This measurement is known as the average true range or ATR.

You should reduce your share size to compensate for wider swings. This allows you to risk a consistent dollar amount per trade.

The ATR measures the average distance from the high to the low in your stock over a certain time period. Most stock charting packages use 14 days as the default. If a stock has an ATR of  1.80 this means on average, over the last 14 days, the average trading range was $1.80.

You should use an ATR filter to assess stocks with a minimum volatility. I use 1.5 as my minimum. This means each stock that meets the criteria, should provide enough volatility to present me with opportunity.

When you combine volatility with volume (liquidity) you have the delicate balance between opportunity and risk. Each trader needs to determine this combination for themselves. It is truly a personal setting. A good place to start is average 2 million shares per day and ATR of 1.5

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