Here's what will trigger the next leg up

Jea Yu has been involved with the equities markets for over 10-years. He specializes with intraday trading in the U.S. equities and futures markets.To receive a free 7 day trial to Jea Yu's Underground Trading Pit, click here or call 1-888-484-8220 ext 1.

Stop losses are an essential part of the trading game. There are two reasons to take a stop loss, to buy more time for a little more transparency and to avoid larger losses due to premise changes. Anytime a trader takes a stop loss, it tells him one of two things. Either his premise for the trade was wrong or his stop was too tight. It is very important to take notes and learn from stop losses. Here is a great example of how we scored nicely from a stop loss.

On 11/14, we took (SHLD | Quote | Chart | News | PowerRating) LONG at 113.75 on dual 8 and 13 min mini pup breakout formations (mini pups are when the lead %d stochastics stalls on the rise as the laggard %dslow stochastics continues to rise to form a wedge like breakout). This is an extremely strong high probability trade setup. Ironically, no matter how much buying came into the stock, the 113.90 level absolutely would NOT break. We eventually had to take stops out at 113.60 to avoid a breakdown on the exhaustion.

Dual 8 and 13 min time frame mini pups are extremely strong breakout patterns. We always will take these on the long side for the impending breakout. However, when these patterns can not breakout and exhaust, they become just as strong candidates to play the short side for a breakdown.

On 11/15, SHLD gapped down and then bounced back up to the prior resistance levels 113.90 x 114. We immediately took SHORTS at 113.90 at 9:32am off the open since we knew first hand how strong that resistance level was the prior day. SHLD eventually leaned down hard from exhaustion level to tightening through 112.50 and bottom at the 111.70 pivot level. This was a very nice score for our traders and we would not have been so cued in on the trade unless we had firsthand knowledge of the massive resistance from the day before.

Never be too stubborn in taking stop losses. Taking stop losses can help you make more money because of the knowledge that you gained from the stops. As I always say "Who better knows how strong a stock is than someone who is short and who better knows how WEAK a stock is than someone who is long?". Find the knowledge and act upon it.

As I stated in my last report, the 60 min NASDAQ e-minis has been on a consolidation going on three days now. The important level to watch is the 1668 break levels. This will trigger the next leg up towards that 1683 level. (AAPL | Quote | Chart | News | PowerRating) and (SIRI | Quote | Chart | News | PowerRating) have formed daily pup breakouts to be watching on the futures breakouts with daily upside targets at 63.95 and 7.41 respectively.

Be aware and be assertive. Good trading all!

Jea Yu