July 17, 2018
By Mish Schneider
There are so many indicators out there to choose from.
MACD, Elliot Waves, Fibonnaci, Mean Reversion, Momentum, Volatility, Bolinger Bands, Phases, etc., are just a few popular among technical traders.
We at MarketGauge.com have quite a few quant models that mainly employ trend strength indicators.
But, what we teach and practice in our discretionary trading courses and services is the opening range theory.
That technique or strategy was born from what we learned during our old school days trading on the New York Commodity exchanges.
Our A.M. Trader is one course that teaches you how to use the Opening Range to quickly identify the best day trade and swing trade entries with the same strategies we've used for 30 years!
Today, before the open, I was asked on twitter how one should trade Netflix, given its huge gap lower post earnings.
Want to know what I said and how that gave you old school cash fast?
For our selected picks, we typically use 5 and 30 minute opening ranges to time our way in and/or for targets and stops.
When a huge gap up or down occurs, there is another option.
The 2-minute opening range fade or follow the gap strategy.
NFLX opened near $345 after closing at $400.48.
Here was the tweet responding to the question, “Is this a knee jerk sell off in Netflix? Buying opportunity? What do you think?”
My response, “There has to be some setup-a quickie possibility of a 2-minute fade the gap opening range play..”
Here is a 2-minute candlestick chart. Bar charts are fine too.
Notice that the first 2 minutes trade down. Yet, the 3rd minute broke out from the first 2-minute range.
The stock never looked back.
An entry at around $347 yielded a $40 gain in a matter of 2 ½ hours.
And that is if you sold the highs.
A later tweet to direct anyone who might have taken the 2-minute OR trade was, “BTW (by the way), like to see NFLX hold the 380 level-especially on a closing basis. Plus, the gap fill is to 403.36 (which really is 391.75-yesterday’s low)-if can fill good sign, if not, consider taking profits and seriously trailing up stops.”
That advice does not necessarily cover the exit and stop rules for the 2-minute O.R.
However, it does demonstrate good “old school” tape reading-the kind we learned on the Commodities floor.
Even, if you got in late and got out early, the money made gave you amazing dollars and made good sense.
So next time you see a stock making a substantial gap down or up (it works both ways), think of the 2-minute rule and get ready to ring the old fashioned National cash register!
Tomorrow, July 18th at 4 PM EST, I am the kick off speaker for a wealth365 Summit event called “The Ladies of Wall Street.”
I will show you where I’m looking for the next big trade. Plus, show you how you can identify, and methodically profit from, the market’s best trends on your own in the future!
S&P 500 (SPY) Took out 280.41, the March highs. That’s still far from the January highs at 286.63. Now, must hold 277.00
Russell 2000 (IWM) Inside day, which is interesting as this means the small cap traders paused, not fully convinced the NASDAQ strength is real. We need to see this clear 168.03 for starters, but really it must get over and hold 170.00. Support 164.70.
Dow (DIA) 250 pivotal. 252.35 resistance.
Nasdaq (QQQ) Another 2-minute O.R. beauty. Held the 10 DMA and went on to make another new all-time high. 180 pivotal
Every day you'll be prepared to trade with: