Trade Idea / Trade Management

SCTY did exactly what I was looking for in the original trade idea and set-up, (letting the trade come to us) which relies on a few basic concepts that are seen over and over again like the head fake move.


The 6/24 Trade Idea, Trade Idea/Set Up: (Longer Term) SCTY and set up had a specific area in mind, a gap up above $71.20 which I set alerts for that triggered this morning, the idea is simple and explained below in this excerpt from the 6/24 idea linked above. There are also several basic concept charts for the trade idea in the post.

"Typically with a Doji/Star as a reversal candle, the confirmation candle of a downside reversal in about 50% of the cases over the next day or two, will gap up and then close down forming a bearish engulfing candle, confirming the downside reversal, that gap up with the 1-5 min charts going negative is an ideal entry and the lowest risk entry for a SCTY short position which I'd view as a longer term trending trade because of the size of the top.

I'll be setting alerts for a move/gap above $71.20 to look at a short in SCTY."

On 6/27 there was another update with a broader perspective of SCTY and how it has similar characteristics to the broad market, SCTY Update , History and Market Dynamics as a Proxy, the basic idea is something I've been using for well over a decade, time consuming, but effective...each night I'd go through several hundred stocks quickly on different watchlists, the basic concept is with whatever indicators I was using at the time and how price action was shaped, you'd either find a lot more bullish or bearish set ups and the broad market would often be in line with the majority stock trend, the market is no different today which is why I mention the numerous H&S tops with or at right shoulders like SCTY as it closely mirrors the R2K. However the important chart as far as today's activity goes is the one I drew as a representation of the bearish engulfing candle mentioned in the excerpt above from the initial trade idea... This is the chart from the post linked just above from 6/27...

I drew in the candlestick I was looking for to enter the trade to the far right under the red arrow, it is a bearish engulfing candle which would be an ultra-high probability downside reversal confirmation candle and a nice entry that gives you a natural stop just above the intraday highs with low risk., but the first thing we needed was a gap up above the $72.20 area as a bearish engulfing candle can't be formed without one.

This is what we have so far...

 Daily SCTY with this morning's gap up, tone since then hasn't been good as there's a large upper wick rejecting higher prices and the bearish engulfing part of the candle in which the close moves down and hopefully engulfs the previous stars and dojis of the last 4 days, providing an excellent price, low risk entry.

There's a chance it ends as a star or Doji today, in which case the same gap up tomorrow and bearish engulfing candle would be necessary to confirm the reversal down from the top of a right shoulder in a larger H&S pattern.

Initial indications look good for the trade.

 The faster intraday is clearly leading negative

 The 3 min chart is shown with a trend view, but intraday it is also negative

I initially started with the ornage version and moved to the blue as it is faster and better suited to stocks with momentum like SCTY, but this gives a little better overall trend perspective and the 5 min chart is leading negative intraday as well as the trend at the top of the right shoulder.

 I would hardly ever use the yellow version of 3C which is usually reserved for larger cap, Blue chip types of stocks that trade a lot differently because of their size and the time it takes to put positions together, but the point is I checked every version of 3C and am getting the same signals throughout. I didn't post the longer term charts that are already posted in previous articles because they have not changed for the better at all, just for the worse so there's nothing that concerns me there.

10 min

Here's one of the most recent chart follow ups from this Monday, SCTY Follow Up-Charts...

I also already started a partial position in SCTY, Trade Idea: (Swing Trade Plus) SCTY , although this is a longer term trend idea, I labelled it as swing plus because the first downside target would likely be the neckline after a roughly 50% move forming the right shoulder, there would likely be a consolidation around the area, likely below and then a head fake move, so how the trade is dealt with longer term is more up to the individual, I'd say the broad market will have a large influence on that decision.

While I intend to open a half size position and wait for the gap up for the rest, I'm closer to about a 1/3rd of a full size, so I'll be adding another third here and if it looks like we are going to close with the bearish engulfing candle today, I'll likely fill the position out in to the close. I'd like to see higher volume on today's candle, but considering the holiday and lack of carbon based traders, I wouldn't be discouraged if we didn't get that.

I would say to those more cautious, if you want to wait toward the close to see if there's a reasonably close bearish engulfing candle, you are still well within an excellent entry area and low risk as stops can be placed just above today's intraday highs.