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The highest probability set up with my methods is called the Perfect Storm. This is a filtered set up that looks for converging pup and mini pup patterns in at least three time frames (3/8/13/60 minute and 1 minute as a trigger).
Just to refresh real quick, pup patterns are when the 5 period simple moving average stalls sideways as the 15 period simple moving average continues to rise. Eventually, steam builds in the contracting trend channel to cause an explosive breakout above the 5 period moving average usually with upside targets at the upper Bollinger bands. This is a setup that filters.
Mini pups are when the lead %d stochastics stalls on the rise as the laggard %d slow stochastics continues to rise to form a wedge like breakout.
The beauty of perfect storms is that they validate the trend moves on enough time frames so that the wiggles are extremely small due to multiple overlapping layers or support/resistance. The gains can be relatively large because of the wider time frame targets. (RMBS | Quote | Chart | News | PowerRating) was a great example of a perfect storm that our members played.
We first spotted the 60 minute moving averages on RMBS formed an inverse pup breakdown. From there, it was just a matter of timing the shorter time frames and utilizing the 1 min chart for a nice entry. This entry came at 11:48am at $30.20 as the 1 minute stochastics took a mini inverse pup slip which also set up 3/8/13 min inverse pup breakdowns. The $28.90 was the 60 min lower Bollinger band target, but the real key was the multiple overlapping resistances at 30.40 x .50 level on the 3/8/13 minute 5 period moving averages. This triple later of resistance keeps the wiggle relatively small while the selling pressure builds up and eventually collapses the stock as RMBS leaned to the 28.90 target on the nose. Our members locked the $29.20 overshoots for a nice fast 1 point gain.
The Nasdaq 100 e-minis are starting to consolidate. There is just too much of a cluster of support/resistance in the 1711 x 1726 channel. No use in trying to even foreshadow where these noodles will go as the daily Bollinger bands are likely setting up a tightening as well. We are just sticking to the earnings for volatility and nice profits with very little concern for overall market direction. Stay on your toes, good trading all!
Jea Yu
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 888.484.8220, ext. 1.
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The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
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