Knowing When To Scalp

I love using relative strength and weaknes. But I don’t use it only intraday, I use it on longer time frames as well. During my trading, I am mainly using 1, 2 and 5 minute charts. However I also pull up the 15 minute and Daily to get a sense of what the stock is doing longer term.

Today, $DE came up on my NR7/tight consolidation Trade-Ideas Scan. I saw a seller at $87.50.  I immediately shorted .49s and added a full position when I saw it was having problems. I covered my risk real quick into the drop and let the rest do the work.

However, I knew this trade was NOT going to be a ‘trade 2 hold’. It was going to be a scalp and I was going to take profits at 87.00 (basic psychological support). And that is exactly what I did. I took the position off at 87.00. Why did I scalp this and not leave a runner on? Because by looking at the daily chart, you saw this stock was strong, and thus no panic selling was going to come in. Nobody is trapped long that needs to get out. And that is exactly why I took the scalp.

Looking at the chart now, $DE had a great retrace to VWAP which would’ve given you the chance to add the short back on. But since I stop trading 30 minutes before noon to get ready for class, I missed that trade.

And yes, this trade is not anything to “write home about”, but on a day with limited opportunities in terms of ‘In-plays’, it makes the effort of getting out of bed at 5AM worthwhile (and i’m not talking about the money, I’m talking about the opportunity to make a good trade).

The Charts

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Tags: $DE, $STUDY

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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