Last Friday, October 9th 2015, I noticed a nice looking chart on YUM. YUM had disappointing earnings and was down $15.96 in 2 days or 19.1%. The stock seemed to have found a bottom and I noticed several levels worth watch. See figure below
Numbers 1-4 were areas I was watching. (#2 represents a trend-line or flag) These are pretty easy to identify if you zoom out and look at a bigger time frame such as the 60 minute chart.
So I had this stock on watch entering Friday. Below is the intraday 5 minute chart that I used to enter and exit the stock.
1) Stock breaks the down-ward trend line. This moved way to fast for me so I waited for the first pullback.
2) Stock finally pulls back and begins to form a flag. As the white line represents areas from my 60 minute chart, this held a support level. (Remember previous resistance can and will become new support)
3) As the stock begins to flag and hold support, it makes higher lows. I decided to take a long position. The 9ema finally caught up to the price and the stock began to move upwards.
4) The stock broke out of the flag pattern and the final area of resistance (represented by the top white trend line. The stock was off to the races at this point and never looked back. At this point it is just a matter of scaling out of your position and taking profit.
Another stock that I traded with similar patterns and set-ups with BIS from 10/13/2015. BIS is the bear ETF of the biotech sector (represented by IBB) Below in the hourly chart with areas of interest I was watching.
As we can see from the 60 minute view, BIS actually broke resistance but was immediately rejected and traded back into its range. It bounced at support and then traded back to the top of the range. The stock paused at the high of the day. I then looked for a good intraday entry.
You can read the reasons of my entries above on the chart. When a stock clears resistance and isn't in a range, flags work. There is a difference between a trade-able stock with working intraday set-ups and a stock that is just moving and thus not trending. It took me a while to finally understand this. Now that I have, I can narrow down the charts I want to trade and trade less crap.
Just a side-note to show you why its not all about intra-day setups as well. Take a look at CANF from Monday October 12th 2015.
You can argue that when it took out the high of day this could be an ORB play. But take a closer look at the bigger picture when you zoom out.
The stock ran into resistance. An intraday long set-up was a low probability trade.
The main thing I have learned from trading has been to get your bias of a stock from the daily or 60 minute chart and then take intraday patterns that go along with this bias. Look for your clean charts and trade the flags within.
