Today’s Trading Lesson | Criteria for High Probability Trades
Great trades have common characteristics, here is the criteria I use:
Criteria #1: Institutional Activity:
An element of risk is liquidity. A smart trader must consider the activity level of each stock. The more shares traded, and available to trade against, the better the chance to buy or sell at a reasonable price. A baseline criteria is an average of 2 million shares traded per day.
Criteria #2: Opportunity:
Each stock has a certain volatility, or average dollar amount from high low each day. Too little, and your profit potential diminishes. Too much, and you will trade scared. A good starting point is a one dollar average true range. (Using a 14 period calculation)
Criteria #3: Price Trends:
An obvious trend to institutional activity, defines a bias. Are buyers or sellers in charge? How do you know? Consider using a 20 period simple moving average to determine your bias.
This foundational bias sets the stage for actively pursuing opportunity. If this bias is not obvious, you have a weak argument.
Criteria #4: Price Change Between Trading Sessions:
This criteria represents the bias from yesterday’s closing price to the current price. If this net change is in sync with the price trend bias, your argument begins to get stronger.
Criteria #5: Today’s Institutional Activity:
This criteria identifies today’s bias. Monitor the last price, relative to today’s open price. When this criteria is in sync with criteria #3 & 4, your argument begins to strengthen.
You can see this criteria in a glance, using candlestick charts. You are looking for a red or green candle to show you today’s bias. This criteria keeps your argument relative to today’s activity.
Criteria #6: Institutional Follow-Through:
Are institutions supporting higher prices and creating new highs, compared to yesterday? And vice versa for a selling opportunity. Using daily charts, identify if your stock is showing a higher low, and a higher high, compared to yesterday’s price action.
Criteria #7: Relative Strength:
Run criteria #3-6 for the $SPX. You are seeking opportunities when your stock, is trading in sync with the general market.
When the indices meet your minimum criteria, there is a bias to the mass of stocks. When your stock is in sync with this bias, you have what is known as relative strength.
On the Tape Today...
$SBUX inside day and close on the lows. Look for a short sale with a $53.50 target. (see chart)
$AAPL continues to trade higher. Today's open will dictate the trade. A higher open is a scenario to take profits, not enter a new long.
$DIS should get at least one day's worth of follow through lower after yesterday's earnings report.
$FB three consecutive indecision candlesticks, look for a trend day today. If it's lower, let it go.
$SBUX 8-10-16 (Click to Enlarge)
Wall Street waits for a catalyst as stock futures hold near record levels
Disney falls premarket in the wake of its quarterly report
U.S. stock futures on Wednesday pointed to a roughly flat open, putting the market on track for another day of muted action around record territory.
“Volumes have been very low as investors seem to be waiting for major market catalysts,” said Angus Nicholson, a market analyst for IG, in a note on Wednesday.
Individual movers: Shares in Walt Disney Co. fell 1% in premarket trading after the entertainment giant late Tuesday reported better-than-expected quarterly profit and revenue. It also announced a direct-to-consumer streaming service for ESPN.
Also late Tuesday, SolarCity Corp. posted a wider-than-expected quarterly loss. The largest home solar company in the U.S. by rooftop installations is in the process of being acquired by fellow Elon Musk company Tesla Motors Inc.
Handbags seller Michael Kors Holdings Ltd. and clothing maker Ralph Lauren Corp. KORS, -2.22% are among the companies expected to post earnings before the open. Burger chain Shake Shack Inc. SHAK, +0.48% is slated to report quarterly results after the closing bell.Read More — >>
Stock Market Today: Heatmap of the S&P 500
Stock Trading Today 8-10-16 | $SHAK Earnings
Nasdaq Near Record High As Apple Rises for 5th Straight Session
tocks eked out slight gains Tuesday as falling oil prices and an unexpected drop in U.S. productivity kept a lid on investor sentiment.
The Nasdaq climbed 0.2% to a new intraday all-time high, led by modest gains in Apple (AAPL) — which rose for the fifth session in row — as well as for Alphabet (GOOGL) and Facebook (FB). The Dow Jones industrial average and the S&P 500 each edged up a fraction.
Volume rose slightly on both the Nasdaq and the NYSE, according to preliminary data.
U.S. nonfarm productivity dropped 0.5% in Q2, the third straight quarterly decline and far below the expected 0.5% increase. Meanwhile, U.S. oil futures sank 1% to under $43 a barrel as traders weighed concerns of a supply glut against the possibility that OPEC members might curb output at their meeting next month.Continue Reading — >>
Tape Reading the SPY ETF
$SPY kisses new highs and retreats…hmm
You can’t short, but the long is a tough way to make money here. If you’re keeping a detailed journal you know the breakout trades are not the way to go in this tape.
Stocks in Play: $SHAK research on finviz.com
$SHAK Earnings NEWS: Shake Shack (SHAK) Stock Up Ahead of Q2 Earnings
Analysts are looking for the New York-based burger chain to report earnings of 13 cents per share on revenue of $63.15 million.
In 2015, Shake Shack earned 9 cents per share on revenue of $48.45 million.
Analysts are modeling earnings of 44 cents per share and revenue of $252.01 million for the full year.
The quick-service restaurant industry is under pressure, with same-store sales on the decline across a number of companies, Barron’s reported recently.
Stocks to Trade 8-10-16 | Wednesday Edition
Short-Term Trading Momentum:
Positive the last 20 and 5 trading days | closed 2% higher from the open: VRX, ENDP, CHTR, HZNP, RAX, MYL
Negative last 20 and 5 trading days | closed 2% lower from the open: nclh, fslr, cf, rrc, kss
Quarterly Order Flow:
Bullish Stocks to Trade: CHTR, AEM, AVGO, TWLO, SHPG, LRCX, AAPL, PXD, COST, BIIB, AMZN, LMT, CELG, AMZN, FB, BLL, IBM, NFX, EOG, DVN, SLB, HOG, MPC
Bearish Stocks to Trade: nclh, rcl, fslr, cf, trip, gpor, gild, luv,
2x Normal Volume: VRX, ENDP, BMY, SM, DIS, NCLH, COH, LMT, MCHP, RCL, D, RAX, FSLR
Inside days: bmy, sm, c, wmb, abx, lmt, xom, nke, sbux, abt, wmt, teva, pypl, luv, so, jnj, pm, stx, hbi, ibm, bhi, celg