Nice Follow-Through... - TraderPlanet

By: Scott Redler

…Today Could be Tricky

Yesterday we saw a lot of follow-through on trades we put on earlier this week and between X-mas and New Year’s. My rule holds that you get involved on day one, as a stock breaks its resistance level with volume (either downtrend line, like GS on 12/30 or horizontal resistance. You get paid on day 2 of follow-through, typically selling at least half of the position. Then, on day 3, I basically move towards flat and start looking for a contra trade for a scalp. If there is a day 4-5, that’s usually when I put myself through a little pain.

GS is now up four days in a row, but is trading a little lower this morning. My strategy for today would be to see if they can push the stock through yesterday’s high of $176.26 and then watch the price action–i.e. if it goes to $177, the futures keep going, and I see a divergence in relative strength, then I start shorting a little bit. If the stock subsequently trades back below yesterday’s high, I add to the short, looking for a counter-trend move on an overbought stock. This is how a RedDog reversal setup plays out!

You can use this type of strategy on any stock, in any group, as long as it is extended to the up or downside–BUT, it’s a calculated trade–you NEED to watch price action closely for an entry.

The Rundown:

The remainder of the banking sector just completed its second day up–they started later than Goldman (GS) and are playing some catch up!

Casinos had two HUGE days–you can use the RedDog reversal strategy here as well. The easy part of the long move is now in the bag.

AAPL and GOOG seem tired and could use a few days off–watch those upper ranges for a breakout.

BIDU has news–maybe it is used as a catalyst to get this stock back on the move to the upside.

AMZN did a small 80-20 RedDog reversal yesterday–I am long now–the stock might break its mini downtrend, at which point I will add if I see volume around the $135.50 area.