Toni Hansen

TRADES FROM 5/11-12/2005

ADTN Morning Gap Breakout

http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_20050511adtn1.gif

ADTN is a stock that initially showed up on my radar by being in the top morning gainers list. Right away it was not really that great intraday because it pulled back off the open. It was a stock we've been following since Monday, however, from the focus letter based on the daily chart. Hence, it had a great deal of room on the daily chart for an upside setup to move. Just before 9:45 ET it pulled back up to the highs zone and began to base there. It was essentially a cup with handle on the 1-2 minute charts and the trigger was as the highs of the handle broke, which happened into 10:00 ET. The stop was based on the lows of the handle. The scalp target was based upon first resistance on the 5 min charts with the larger daytrade target of 21.50 based upon the equal move with the gap as well as price resistance.

TZOO Breakout Attempt

http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_20050512tzoo1.gif

TZOO caught my eye because of the gap this morning shown on the left. This is what I call a "breakaway gap," meaning that it breaks out of the former trend channel. As such, I started watching it for a base at highs. Now what I want you to notice is that the entry I used was really not ideal. It was not like the entries we've had on other breakouts because this didn't form a great base at highs within the range. A better entry would have been on the 9:45 ET pullback or the breakout into 10:15 ET. This entry was thus higher risk than I typically take. It means a much wider stop than normal as well. On this type of daily pattern, however, you are more likely to get a trend day. I took partials at about 1:1 r:r just after 10:15 with the $33 price resistance zone. I then adjusted stops to under the 2 minute 20 sma and the price support from the prior breakout. It fell too quickly into this support though, leading to it breaking and remaining weak from that point on, hence triggering breakeven stops on remaining shares.

Helping to tell you that it would try for new highs was the fact that on the 9:45 ET pullback, volume actually declined. This meant that people really were not bailing on it despite the pullback. I raised the stop prices as quickly as possible. Notice how I used under each prior pivot lows. This is a good way to quickly cut risk on stocks with wider stops than preferred. Had I waited and took the 32.50 breakout my stop would have been under that 4th red stop level.

YM Intraday Reversal Off Highs

http://tradingfrommainstreet.com/images/roomexamples/TRIANGLE_20050512ym.gif

That chart of the YM shows the YM on the 1 min and ES on the 5 min. I actually took it on the YM myself but all three indices had the same pattern. My entry time was 13:26:54 at 10292. It was a break of the 5 minute upswing and then the 1-2 min base as that swing broke. You could have used under 10290 if you wanted to use under the last 2 min pivot low as the channel broke. That would have been ok as well. The stop on this pattern is just over the pivot high. I circled the market alert updates for partials and target on the larger pattern. Notice how volume was next to nothing just before the breakdown. That scares a lot of people. They don't want to trade when volume is so light. It's really the best indicator of a imminent break though.

© 2005 Toni Hansen, All charts created using Real Tick III by Townsend Analytics.

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DISCLAIMER: Trading in commodities and securities may not be suitable for all individuals. Consult your broker or other professional to determine your suitability. The discussions provided by Toni Hansen are for educational purposes only and should not be taken as a recommendation to buy or sell the referenced security. Past performance is not indicative of future results.