Trading for Dummies, Q&A #74

EchoStar Communications, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Tuesday, November 11?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Tuesday, November 11?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Down. You'd be looking short.
3) Short at 34.27 on a sell stop below the 12:00 up bar.
4) Initial Protective Stop: 34.72. (max. 1.31%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could cover half, carry half, or just close it all at once.

..........

Once again the intraday sentiment was negative so I was looking short. 7 of 10 Abnormal Characters were droppers (as opposed to poppers) but DISH stood out because it was extraordinarily active, so I watched it for a place to enter.

The noon up bar provided an excellent spot to get short beneath with only 1.31% initial risk. Shorting 1000 shares of this was like dripping a tiny drop into a vast sea of liquidity... it would have been easy to sell 100 times that amount (assuming you had the money and could locate the shares). The stock closed at $32 giving a 6.62% gain from entry for a reward to risk ratio of better than 5:1.

Let's go over the drill yet again: judge the broad market direction using your sentiment indicators (VIX, TRIN, etc.), find an Abnormal Character that is moving in that direction, wait for a bar to execute against, manage your risk, take the afternoon off.

If price doesn't reverse on you, then you're going to make some money. If price does reverse, then you get stopped out and happily come back to play again the next day.

..........

Screen capture of my intraday Watch List:

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