Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Strictly Buy and Sell Set Ups -- Ignore unavailable to you. Want to Upgrade?

To: whitepine who wrote (11881)	4/4/2007 4:26:23 PM
From: chowder	Read Replies (1) \| Respond to of 13449

Re: STR ... >>> Question: why didn't the buyers after March 6, buy when STR was tanking on March 1-5? Why were those who bought later to willing to buy when just a few days before, they were not? <<< This is a great question! The buy set up is the difference between the professional trader and the novice. (It took me a long time to understand this, and even longer to make it a part of my strategies.) The novice trader focuses on the potential return. The professional trader focuses on the potential risk. The professional trader is willing to give up percentage gain for a lower risk entry, and then buy a larger position to offset the gains he could have made by buying a smaller position earlier in the move, and thus offset profits he may have missed. The set up begins with the price action on February 22. Price opened on the day at $81.78. Price then traded up to $86.32. Up $4.54 on the session and really looking good. Then we saw selling hit the market. The bears took price all the way down to close at $82.95 ending up just $1.17 on the day. That selling is the first step in why buying didn't show up in the following days. That selling formed a long topping tail. It was this price action that showed the first of the: SIGNS THAT MAY SHOW IMPENDING DANGER FOR YOUR STOCK: 1. The stock gives back most of its gains during the last two hours of trading. Message 20718173 The second thing professional traders looked at is the price action in the following days. Price gapped down at the open on successive days. This was reason for concern. The third concern was the volume being above average on all 3 days the price pulled back. At this point, the professional trader was more concerned about risk than profit. One of my favorite buy set ups is the 3 to 5 bar drop, "after price sets a recent high." STR formed the perfect set up. It set the price high on February 22. Price then pulled back over the next 3 trading sessions "into a rising 20 day moving average." The buy comes if price can trade above the high of the third day, which it did in this case and the trade was entered. It's all about low risk entries for the professional trader. They aren't concerned about catching the bottom. Manage risk and the profits will come. The professional trader did not buy the drop between March 1 - 5 because he was managing risk. He was looking for a low risk entry. The professional trader was more than happy to buy after March 6 because the risk had been minimized. They could buy a larger position and feel confident that price would continue its up trend. And, it has!