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Gapdown

Granolabar's Gap Down Guide (my own style)Introduction Within the past week, AMEX:SPY has become increasingly volatile, with massive gap ups and downs followed by all day runs extending more than 3% in either direction. This is apparent with a cursory glance at the following chart. With this volatility comes uncertainty, especially for those who are swing trading on the timeframe of a few days to a few months. However, we can use this increased volatility to our advantage. i am going to introduce my way of trading these days, particularly the ones involving gap downs. Identifying the Setup Identifying the setup is relatively simple, but there are a variety of factors that can improve your chances of success. Firstly, the stock needs to have gapped down overnight. This one is quite obvious and easy to identify; look for a literal gap in the prices going from after hours to premarket, like those identified in the following chart of SPY. Secondly, there are a few things that can improve the chances of this strategy playing out. For example, if the stock recently hit a supply zone and rejected, the gap down is more likely to be followed by more downside as the stock is already in "pullback mode." Additionally, trendlines are another great thing to keep in mind. For example, SPY recently hit a nearly 4 month long strong trendline and rejected. Generally speaking, the larger the timeframe that the trendline is identified on and the more "touches" it has, the stronger it will be. I often find it useful to work my way down from the 1 month or 1 week chart down to the hourly to identify trendiness that I need to keep in mind. Trading the setup To trade this setup, I like to primarily stick to the 5 minute chart. The one minute chart has too much noise, while the 15 minute takes too long for confirmation that you would miss a sizable amount of the move. Once you are on the 5 minute chart, draw a horizontal line at the bottom of the premarket low, as shown below. This will be the critical value to watch. Theoretically, you want to enter when that line breaks , BUT there are often fakeouts around these critical levels. To know when to enter the trade, I watch the candle sticks. First, there must be a 5 minute candle that closes below the premarket low. Then there are two possible scenarios from here. Scenario 1, the next candle immediately pushes below the low of the first candle. In this case, you would take puts or sell short as soon as the second candle breaks the low. My reasoning for this is that if the movement is strong, the second candle would not hesitate to make a new low. It is better to enter on the break than to wait for the candle to close and miss out on potential profits, which are often pretty sizable when things are moving quickly. Notice in the below example that had you waited for that candle to close, you basically would have missed half of the entire fall, which lasted 4 5 minute candles. Scenario 2, the next candle does not immediately push below the low of the first candle. In this case, you would wait until there is a candle that closes below the low of the first, instead of merely making a new low. My reasoning is that if the momentum is not strong enough for the second candle to immediately make a new low, the confirmation candle to enter needs to be more definitive. The play is not invalidated because the first candle closing below the premarket lows indicates that there is downwards pressure. In this way you minimize the likelihood of shorting a bear trap while also capitalizing on the fall. Let's Talk Take Profit and Stop Losses Now that you have successfully entered the position at an optimal place, the next thing to consider is where you want to exit, whether that is to secure the tendies you just made or protect yourself from further losses. Note, this part is completely up to you and your risk or reward tolerance. Assuming that it all goes to plan the the stock starts to fall: I typically trade weekly options for this kind of play, as it is a short term play. Because options premiums move quickly in both directions, I will take profit at 25% with about half the position if the candles are getting smaller, indicating that the trend may be weakening. Then I will set a stop at open, meaning that I will sell the remaining portion of the position if the contract goes back down to my purchase price; this guarantees that ultimately the play is profitable. However, if the candles stay rather large, I will hold the position until the candles do start to get smaller, and sell half the position there, often around the 50%, 75%, or 100% profit mark. If the option does hit 100% profit, I will almost always sell half, with very very few exceptions. This ensures that even if the other half of my position expires worthless(worst case scenario), I come out of the play completely unscathed. If the play does not go according to plan: Let's assuming that right after you enter based on the conditions above, the stock reverse to the upside. Now the question becomes, when do you sell to prevent yourself from taking major losses. For this I use my EMA clouds, or simply just EMAs with the region between the lines shaded in. I typically have a 5/12 EMA cloud (green) and a 34/50 EMA cloud (blue). As soon as one candle closes above the 5/12 green EMA cloud on the 5 minute chart , and the next candle closes above the first candle, that Is when I take the loss and move on. Often times, when playing this strategy, the price will come back up and retest the break line; do not panic if the position is immediately red, but also stick to the stop loss rules mentioned above. This cloud strategy also applies to closing the last half of the profitable position mentioned above. When you are left with half a position at 100% profits or more, I will wait for reversal to sell. The reversal tends to happen when one candle closes above the 34/50 EMA cloud on the 1 minute, and the next candle pushes past the first high. There are also many other ways to market the bottom, such as bullish divergence, engulfing candle, abandoned baby, etc. TLDR This is my way of trading gap downs that utilizes candle sticks and the EMA clouds to determine Stop loss or Take Profit places. Simply put, buy puts when the price cleanly breaks the premarket low, ride with the clouds until they suggest a reversal or hit a stop loss point. if you have any questions or comments, please feel free to let me know. I would love to hear other perspectives or criticisms. Also, the "clouds" are just EMAs filled in with crayons, but if you want the script, it's in my profile.
Editors' picks
AMEX:SPYEducation
by granolabar_trades
30
BTCUSD to see a slight downtrend(4Hr)! | Gap Down observedMarket in last 24hrs BTCUSD saw a downtrend with price moving sideways Price volatility was low. The market moved ~2.47%, between $11.48k and $11.2k Today’s Trend analysis BTCUSD expected to see a slight downtrend as gap down was observed with Bollinger band expansion taking place Price at time of publishing: $11,316 BTC’s market cap: $209 Billion Oscillator indicators are mostly neutral. RSI at 36 Moving average indicators are indicating a downtrend. Ichimoku Cloud is neutral Volume indicators observed a decrease in the recent candles with an increase to 20-candle moving average Price expected to see a slight downtrend as gap down was observed with Bollinger band expansion taking place. Most of the Oscillator indicators are neutral. MACD line approaching from below the signal line, with the histogram size decreasing in the negative direction. RSI at 36, below to the midline still in the neutral region. CCI at around -118, in the oversold region with an upmove from -188. Another interesting point to notice here is that the volume in the recent candles saw a decrease suggesting a weakening selling pressure, with an increase in 20-candle moving average. ---------------------------------------------------------------------------------------- The analysis is based on signals from 28 technical indicators, out of which 17 are moving averages and the remaining 11 are oscillators. These indicator values are calculated using 4 Hr candles. DM to get details of the above analysis and list of indicator & their values used to arrive at the above conclusion. Note: Above analysis would hold true if we do not encounter sudden jump in trade volume . ---------------------------------------------------------------------------------------- If you find the analysis useful, please like and share our ideas with the community! - Mudrex
COINBASE:BTCUSDShort
by Mudrex
9
TSLA EarningsTSLA has been on a rampage lately, and it is safe to say that this is a highly volatile stock. The ER is today (Wed, Jul 22) and will be announced AH. Given the hinderances imposed on almost all Americans during the Coronavirus pandemic, despite the major run-up TSLA has had, my personal opinion is that EPS will miss expectations. My guess is that the insane bull run by TSLA was purely on earnings anticipation and bandwagoning, and it is due for a huge pullback after the ER. In the coming weeks I believe it is likely that TSLA could fall back into the $1200s area after the ER release and the hype (for the most part) subsides. It may try to test the support trend line before ultimately breaking and gapping down, but after all, it is TSLA, and it has surprised us many times before. If you plan on trading the ER for TSLA, please be aware of the IV on it and do your own research before executing any trades. TSLA is an amazing stock but it will burn you if you are not careful.
NASDAQ:TSLA
by nmatto
1
FCPO TRADING : 85) a possible false breakout...hi, this is trade 85) frm haidojo trading. fcpo-oct has emerges and becomes the new active month...so if you have traded fcpo long enuf, u must know then onli trade the third active month...the resistance 2560 has officially not broken yet...so we wait for : 1) IF the price move back to retest the 2560 and failed, THEN we have a Double-Top formation, indicating short 2) IF there is a gap down today or tmr, THEN the 2560 candlesticks yesterday has become a "lone island", forming some kind of head...so we can still go for short... 3) IF price juz settles calmly near 2474-2480...THEN rebound...go for long, nothing has changed...uptrend persists... support level : 2475-2480 resistance : 2560 higher resistance : 2630 WARNING : this is solely for educational purpose onli, it is not an indication of buying nor selling therefore trade at your own risk... **welcome to leave some comments, your "LIKE" and "FOLLOW" are highly appreciated and they are my main source of motivation to proceed further to post more valuable contents...**
MYX:FCPO1!
by HAIDOJO_trading
Woah! This thing identifies SPY gappers!So previously, I released an indicator called "Bunch of Numbers", believing that it was pretty useless. BUT guess what? It turns out that SPY gappers (up and down) have pretty similar sequence of numbers. WARNING: these same numbers have also caused SPY to gap down!! A "Bart" pattern with these numbers at the end will almost always be a gap down. My methodology: 1) 3 minute chart 2) has to be within 15 minutes of close. Some of these only appear in the last 3 minutes of close. 3) 7's at the bottom of the screen signify that price is touching the 200MA on the 3minute chart. 4) There is no logic or reason behind why a number is labeled "9" instead of "5". It's just a label that the programming gave to a set of conditions. I could have easily labeled these candles with the alphabet 5) Like I said, these same numbers have been known to also GAP DOWN><
AMEX:SPYEducation
by ZombieStar
2
Trading Nose Dive . Small account ? ( No problem ) Hi Traders . This guy today tuck nice dumpster dive on offering. NASDAQ:ROSE Left big gap to fill . Info located on the chart gives you multiple scenarios . If you don't trade gaps its one of the oldest trading strategies but also can take loong time to play out and some timers they also don't play out . Its trading nothing its for sure . So keep that in mind . I did post one trade and payout recently link bellow . Feel free to comment and hit that like if you can . More support from community more content I create . My strategies are simple and I'm looking for trades with the most potential profit possible I can find and that are friendly for small accounts . So if you like to be informed follow . Here its the latest play . 60% gains . Some meat still left on the bone with second gap above IMO . But first i think we will see pullback after this rally ., screen shot for you , Cheers . See you next time .
RLong
by PTO