Saturday, March 26, 2011

032611 EXPE: textbook gap fill breakout day trade pattern

HT @gtotoy for having called this one out @

EXPE was setting up on the daily for a possible gap fill pattern on a break above 22 with more than 2 points in it. 21.97 was the high from Thursday (previous day) but 22 looked like the logical level where buyers had alerts set and shorts were defending. As you can see from the 2 minute chart there were a serious of volume spikes before 11AM that signaled a serious push imminent. Once the stock pushed and held above 22 you can see the real volume pour in and stock rocket 25c (see green zone below).

In hindsight you could have risked 5c to catch 25c (the ideal 5:1 R/R ratio). In the moment I was not prepared to assess the R/R because I did not have an upside target. It's a bit foggy but I think my quick dirty in the moment R/R analysis was that there was 30-50c potential upside and I was only willing to risk 10c or hit out as soon as the 22 level failed max pain 21.97. Now doing the work I should have before I took the trade I can see the 25c-30c resistance which goes back to as early as September 2010. I was able to catch a little less than 20c in the initial up move. I bought more when the 10c level held and sold some more when 25c resistance held.

When the 10c support held again I added more to my core but this time did not sell above 25c since I had converted the rest of my position to a swing looking for a bigger move. If I were still day trading my position I definitely should have hit out when the 10c level failed or when my core was flat or at the very max when 22 failed to hold (see red zone below). My stop is now 20.8 which was never violated but judging from the breakout failure/sell-off into the close I'm expecting to mark this as a good day trade that will turn out to be a losing swing trade.

2 minute chart

Daily chart

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