Sunday, March 21, 2010

ERJ March 19th 2010

ERJ (Embraer) gapped up with volume on Friday Morning.  
Following Tom C's entry rules from the Trader X blog  on opening gap plays - produced a profitable trade. Check it out.

Here are my business rules to help capture potential profitable targets:
- 9:35AM East. Scan for opening gaps using the following parameters. I use FinViz in real time (you must subscribe to the Elite option):

Scan Parameters
  • Minimum daily volume average >500k shares/day
  • Current volumes 3x as normal average daily range.
  • Price above $5
  • Gap up +1% 
- 9:35-9:50 Once this list is produced (I typically flip through 15-20 contenders) i will look for a first Solid white Candle and 2 consolidation candles (hammers and/or no wick above) above the top half of the first Marubozu.  
- 9:55-10:00  By that time i usually have 3-4 candidates to trade.
-10:00-   I will look for a clean break of the candle that will close a point above the opening range.
- Other considerations:  I use 10 minutes periods for scanning ; rely on the 8 Period EMA as guide to a clean trend.  Plot Fibonacci pullback/expansion between first pivot of day and previous day low. Check out this link for reference.  
- Exit rules: i will usually use two rules:  
  1.  I will use the 5 period RSI to guide an exit by getting selling once the indicator crosses below 70 or if i notice a big divergence between highs.
  2. The low of a candle violates the last low from the previous candle that marked a high from the day.