Recap: $KWK and $MTW trades from 8/8/2011

Unfortunately, I need to leave the "party" a bit early today. But needless to say, after not trading last week so that I can update my trading journal on Tradervue (I'm almost done!), I thought the fireworks would be over, and this would be a boring week.  But the volatility from last week continued, and I was able to catch a few good moves.

After getting chopped around for the first few trades in KWK and ELN, I caught a decent move in WYN - 9th bar, 5min chart. I'd likely rate is a C, maybe C+.  But with everything going down, I thought I'd have more margin for error and ended up being fortunate with a win.

Here were a couple afternoon trades:

MWW - 5min, sell below the low of the 13:25 bar. Exited when it barely missed the Fib Extension 2.0 line after watching the price action carefully.

This was was a classic "Beyond the FE" [BTFE] Trader-X type setup.  I missed the consolidation breakdown that was a "Beyond the Opening Range Low" setup that took place 25 minutes prior to this entry. I also missed a vwap line bounce [VLB] trade at around 11:10 that also ended up working well.

KWK - 5min, sell below 14:05 bar. I exited when the high of the green bar was broken (yellow circle).

The is something I believe Tom C. (from the Trader-X archives) would likely take, which was similar to a "Beyond the Fibonacci Extension" [BTFE] setup.  But this had more of a "break beyond the FE first, then pullback to the FE" (in this case, the 200% Fib Extension of the opening range) type action instead of a usual consolidation sideways as you saw in MWW above. 

KWK - 5 min (partial day)

Note that the charts above snapshots made prior to the close of the day, so there's maybe an hour missing.

$MILL - Beyond the Fib Extension (contra style)

$MILL was a stock that got some airplay today from some folks I follow on Twitter.  So even though I'm not trading today, I was able to follow along and see whether it would have resulted in any type of setup I would have taken.  Short answer, yes, it would have been a good trade.

Generally, on a gap down stock, the initial inclination is to look for short setups.  However, there are certain clues that can signal a contra setup.  One such clue is if the ORH (opening range high, generally the first 15 minutes) is broken.

In this particular example, $MILL broke out of the opening range shortly after 10:00 AM and quickly reached the 1.618 Fibonacci Extension (FE) at $4.30.  It then pulled back to the $4 level and found support.  On the 13th bar, a green hammer-like bar created the setup, and it was especially of interest since the high of the bar rested against the FE ($4.14) resistance level.

$MILL 5 min

The Setup:
This setup is one variation of what Trader-X calls Beyond the Fibonacci Extension (BTFE).  But I also add that this is a contra style (i.e. fade against the gap direction) setup.  For my trade tracking/journaling metrics, it might be more of a Pullback to the Fib Extension (PBFE) setup since it wasn't consolidating along the FE, but I'm still sorting out all out my administrative details. 

The Trigger:

• Buy on a break above $4.14 of the 13th bar
• Stop below $4

The Target(s):

• $4.48 for the first half - since there's a 2.00 FE there as well as the usual $.50 natural resistance
• $5.00 to $5.16 area - The $5 is a whole number, and $5.16 is the prior day low.  If price gets there, watch the tape/chart action and find any excuse to get out quick.

The result:
Worked pretty well. The first target was reached 15 minutes later, and the second target was reached within 30 minutes after the first.  Assuming some slippage, you would have gotten:

• First 1/2: ~$.30
• Second 1/2: ~$.83
• Average: $.57

Not a bad risk/reward based on an initial stop of about $.16, which ends up being about 3.5R.