Real-Time ADTN Breakout Trade
| 12/11/00 | 07:04:32 | <Chris> | range on ADTN is 22 3/4 to 23, break of 23 and you can enter with stop at 22 3/4 |
| 12/11/00 | 07:06:24 | <Chris> | ADTN no setup |
| 12/11/00 | 07:08:28 | <Chris> | ADTN setting up |
| 12/11/00 | 07:13:40 | <Chris> | if ANAD doesn't break resistance soon, I'd exit scalp profits full lot |
| 12/11/00 | 07:15:37 | <Chris> | ADTN over 23 1/2 |
| 12/11/00 | 07:34:12 | <Chris> | If you are still in ADTN |
| 12/11/00 | 07:34:19 | <Chris> | I'd exit on this price spike |
| 12/11/00 | 07:34:22 | <Chris> | above 24 1/2 all shares |
RealityTrader Training Session on ADTN Breakout Trade
| 12/13/00 | 09:24:15 | <Chris> | Okay folks, things are dead on arrival, let's go ahead and do a training session on ADTN chart |
| 12/13/00 | 09:24:39 | <Chris> | Please everyone bring up the chart at: |
| 12/13/00 | 09:24:51 | <Chris> | http://www.realitytrader.com/calls/adtn.htm |
| 12/13/00 | 09:25:31 | <Chris> | ADTN was taken from Monday's action. |
| 12/13/00 | 09:25:42 | <Chris> | Let's go over what we had on Monday. |
| 12/13/00 | 09:26:26 | <Chris> | Many will remember that the trend was a very nice uptrend day with the majority of potential taken from breakout trades and pullbacks. |
| 12/13/00 | 09:27:00 | <Chris> | Stocks making new highs and those issues that had been beaten up over the past year were showing signs of continued reversals from their lows. |
| 12/13/00 | 09:27:25 | <Chris> | stocks like TUTS, CRDS, ATHM, NEON were showing this for us. |
| 12/13/00 | 09:28:26 | <Chris> | ADTN however was a stock that was down on the day after guiding estimates lower for the quarter. |
| 12/13/00 | 09:28:49 | <Chris> | So we had a negative gap on negative news in a market that was showing pretty good strength overall. |
| 12/13/00 | 09:29:27 | <Chris> | Whether or not the broader trend mood gave some excitement to the ADTN uptrend from it's lows is uncertain, but the idea of playing breakout trades was more reasonable. |
| 12/13/00 | 09:30:03 | <Chris> | Remember that these training sessions are taken from tape reading principles. |
| 12/13/00 | 09:30:45 | <Chris> | We have a workbook that is free to everyone that signs up for the service membership full or trial. |
| 12/13/00 | 09:31:12 | <Chris> | We encourage everyone to read this book because it describes the main principles and scenarios that we watch for. |
| 12/13/00 | 09:31:35 | <Chris> | I like tape reading as a method basically because it's universal, it goes to the root of price and volume. |
| 12/13/00 | 09:32:06 | <Chris> | Whether the market is up or down, fast or slow does not matter to tape principles. |
| 12/13/00 | 09:32:46 | <Chris> | Tape reading principles are the same in any market, in any kind of stocks with news or in stocks without news in many cases. |
| 12/13/00 | 09:33:32 | <Chris> | We do not need arbitrary indicators nor do we need to form predictions/patterns/or expectations on anything. |
| 12/13/00 | 09:33:40 | <Chris> | The stock tells us what to do at any given moment. |
| 12/13/00 | 09:34:21 | <Chris> | In this sense, the setup occurs, the tape tells us if we wish to enter or not and we move from there with the exit strategy. |
| 12/13/00 | 09:34:31 | <Chris> | Let's take a chart on ADTN from Monday and then discuss what we saw today. |
| 12/13/00 | 09:34:48 | <Chris> | Mainly because I want to show you big differences in trading activity from the last two days to today. |
| 12/13/00 | 09:34:56 | <Chris> | For me at least. |
| 12/13/00 | 09:35:47 | <Chris> | Looking at the ADTN chart we see a move from the 21 area that was missed altogether simply because my focus at the time it made it's move was on other stocks. |
| 12/13/00 | 09:36:10 | <Chris> | First principle of tape reading is illustrated on this move. |
| 12/13/00 | 09:36:48 | <Chris> | We had steady volume with an increase in price. This is the so called ""good buying"" that is described in the workbook. |
| 12/13/00 | 09:37:13 | <Chris> | The end of the move is shown as a top near 23 with another principle of tape described..the volume spike. |
| 12/13/00 | 09:37:35 | <Chris> | This is normally when ""everyone wants in the stock"" and smart money begins to sell their shares accumulated from lower levels. |
| 12/13/00 | 09:38:18 | <Chris> | If you go over chart after chart after chart on any given stock during the day, you can pick out these points of volume spikes and price spikes that normally lead to the end of that move, at that time. |
| 12/13/00 | 09:38:37 | <Chris> | It is simple accumulation/distribution principles based on the public being the last to figure it out. |
| 12/13/00 | 09:38:46 | <Chris> | When they do figure it out and want in, it's time to look to exit. |
| 12/13/00 | 09:39:13 | <Chris> | Volume spikes are indications that public ""figures it out"" either in fast buying, or in fear of holding losing position leading to capitulation selling. |
| 12/13/00 | 09:39:39 | <Chris> | For those traders that have confidence in their execution skills |
| 12/13/00 | 09:39:51 | <Chris> | and confidence in their proper mindset to take a stop when wrong. |
| 12/13/00 | 09:40:04 | <Chris> | They are able to set a short trade on these volume spikes. |
| 12/13/00 | 09:40:36 | <Chris> | There is the risk that it's a weak pullback that leads to new highs, so any type of shorts from the high of the range/resistance must be accompanies by a stronger/thicker ask size. |
| 12/13/00 | 09:40:51 | <Chris> | Otherwise what you consider to be reasonable 1/4 point stop can turn into something uglier. |
| 12/13/00 | 09:41:16 | <Chris> | So we show next a pullback on declining volume. |
| 12/13/00 | 09:42:11 | <Chris> | Again, from the workbook principle of tape reading, you can see that pullback on declining volume, we look for an uptrend to continue. |
| 12/13/00 | 09:42:32 | <Chris> | The trader could try to things in this situation: |
| 12/13/00 | 09:42:45 | <Chris> | The first is what is called as ""trend trading"" scenario described in the workbook. |
| 12/13/00 | 09:43:06 | <Chris> | In this sense, a trader will bid the low of the pullback with a stop at where the level 2 strength occurs. |
| 12/13/00 | 09:43:35 | <Chris> | Again, just as in shorting a price spike, a trader needs confidence in execution and a proper mindset to take the stop if the low of that pullback does not hold. |
| 12/13/00 | 09:43:50 | <Chris> | In this case, near 22 3/8 was a price to be looking for a buy. |
| 12/13/00 | 09:44:12 | <Chris> | If the trader enters at this price, they can either scalp within the range if the breakout does not occur or they can hold if the breakout occurs. |
| 12/13/00 | 09:44:35 | <Chris> | What we see next is a situation by which the trade tried to breakout again and failed. |
| 12/13/00 | 09:44:57 | <Chris> | The black circle on the brown horizontal line demonstrates this failure. |
| 12/13/00 | 09:46:03 | <Chris> | At this point, the range defined from the touch and the failed break was 23 3/4 and I realize it's a bit difficult to see the shelf at the 3/4 level..it might have even been 11/16 level from t his chart example. |
| 12/13/00 | 09:46:13 | <Chris> | But here is the setup comments for this: |
| 12/13/00 | 09:46:15 | <Chris> | 12/11/00 07:04:32 <Chris> range on ADTN is 22 3/4 to 23, break of 23 and you can enter with stop at 22 3/4 |
| 12/13/00 | 09:46:15 | <Chris> | 12/11/00 07:06:24 <Chris> ADTN no setup |
| 12/13/00 | 09:46:28 | <Chris> | No setup was a failed break of 23. |
| 12/13/00 | 09:46:51 | <Chris> | If the trader entered at 23 before the confirmation, they would have had to use the low of the mini range as a stop level and look for it again. |
| 12/13/00 | 09:47:03 | <Chris> | Those that enjoy waiting for the 23 to break, would have not entered. |
| 12/13/00 | 09:47:19 | <Chris> | There is a confusion on whether to buy the break or wait for the break to occur. |
| 12/13/00 | 09:47:25 | <Chris> | My only answer is: |
| 12/13/00 | 09:48:26 | <Chris> | If you are a trader that has more of a feeling for the stock to break, many times this type of trader, and I am this kind of trader, I will hit the breakout price with an order, in this case 23 and an order at 23 1/16 if I feel I can't get 23 |
| 12/13/00 | 09:48:46 | <Chris> | if 23 gets hits great, if not, I whave 1/16 order in too. |
| 12/13/00 | 09:49:11 | <Chris> | Here is the problem with waiting for the breakout confirmation. |
| 12/13/00 | 09:49:36 | <Chris> | And it's a problem that is a fair problem to have if yo uwish to wait for confirmaiton..I'm not putting it down or negatiing it. |
| 12/13/00 | 09:49:47 | <Chris> | When the break of 23 occurs, you are now trading other people's convictions. |
| 12/13/00 | 09:50:02 | <Chris> | Meaning, everyone's conviction is that 23 1/16 confirms the breakout trade. |
| 12/13/00 | 09:50:08 | <Chris> | So everyone goes for it at that price. |
| 12/13/00 | 09:50:28 | <Chris> | If you think gettting it at 23 is hard, try getting it when the breakout occurs :) |
| 12/13/00 | 09:50:50 | <Chris> | Normally you will have to go a level above that unless an ECN with size or asleep MM is at those prices willing to sell it to you. |
| 12/13/00 | 09:51:08 | <Chris> | So there is two things when trading breakouts: |
| 12/13/00 | 09:51:28 | <Chris> | Buy before breakout occurs, in this case, you are trading 'your' convictions. |
| 12/13/00 | 09:51:32 | <Chris> | or |
| 12/13/00 | 09:51:46 | <Chris> | Wait for the breakout confirmation and have order ready to send in case it does. |
| 12/13/00 | 09:52:14 | <Chris> | Using money and risk mgmt principles you will decide how far you are willing to chase the breakout. |
| 12/13/00 | 09:52:32 | <Chris> | This depends on stop price and your entry price. |
| 12/13/00 | 09:52:39 | <Chris> | Setup in this cases was 1/4 point stop |
| 12/13/00 | 09:52:52 | <Chris> | but if you couldn't enter until 23 1/8, now it's 3/8 stop |
| 12/13/00 | 09:53:00 | <Chris> | if you have to, adjust shares accordingly. |
| 12/13/00 | 09:53:23 | <Chris> | Back to the chart..on the third attempt of the break, it finally occurs. |
| 12/13/00 | 09:53:35 | <Chris> | 12/11/00 07:08:28 <Chris> ADTN setting up |
| 12/13/00 | 09:54:03 | <Chris> | In my limited knowledge of TA definitions and applications, this is known as the cup and handle |
| 12/13/00 | 09:54:55 | <Chris> | You can see this drawn on the chart with the horizontal line, the bowl and the two blue diagonal lines showing the area for the handle to be formed. |
| 12/13/00 | 09:55:16 | <Chris> | Normally the breakout in this fashion occurs on the 3rd attempt of the high. |
| 12/13/00 | 09:55:37 | <Chris> | Now, for those that entered the trade we have our stop set at 22 3/4, no worse than 11/16. |
| 12/13/00 | 09:56:07 | <Chris> | Therefore, our risk is assumed (gamblers create risk, traders assume risk) and it's no worse than 11/16-3/4 level. |
| 12/13/00 | 09:56:20 | <Chris> | Now we need to follow principles of tape reading for exit. |
| 12/13/00 | 09:57:27 | <Chris> | When the stock broke 23, scalper exited into a price spike that we can see in the first upside bar and then leveled off. |
| 12/13/00 | 09:57:41 | <Chris> | Volume increased offering a reasonable chance to exit into strength. |
| 12/13/00 | 09:58:02 | <Chris> | For those that are willing to hold the trade (remember that stocks on this day were giving better than scalp profits), |
| 12/13/00 | 09:58:24 | <Chris> | We needed a break of resistance area near 23 1/2-5/8 |
| 12/13/00 | 09:58:58 | <Chris> | So the first pink square used offered a chance to sell at least 1/2 and for scalpers to exit full lot. |
| 12/13/00 | 09:59:19 | <Chris> | Next we had another principle described in the workbook |
| 12/13/00 | 09:59:30 | <Chris> | Shallow pullback on decreasing volume. |
| 12/13/00 | 09:59:47 | <Chris> | This says that the continuation of the uptrend is still reasonable for continuation. |
| 12/13/00 | 10:00:09 | <Chris> | In this situation, the trader raises his stop to breakeven after selling a portion of shares. |
| 12/13/00 | 10:00:32 | <Chris> | Break of resistance and we look for that price spike/volume spike to exit into. |
| 12/13/00 | 10:00:56 | <Chris> | In this case we were able to hold the trade to near the 24 1/2 level where the pink square again notes the area of exit. |
| 12/13/00 | 10:01:09 | <Chris> | 12/11/00 07:34:12 <Chris> If you are still in ADTN |
| 12/13/00 | 10:01:09 | <Chris> | 12/11/00 07:34:19 <Chris> I'd exit on this price spike |
| 12/13/00 | 10:01:09 | <Chris> | 12/11/00 07:34:22 <Chris> above 24 1/2 all shares |
| 12/13/00 | 10:01:28 | <Chris> | Notice what happens at the 24 1/2 level again. |
| 12/13/00 | 10:01:57 | <Chris> | It has a shallow pullback/volume decreases a bit, the stock price forms a little shelf and then breaks higher once again. |
| 12/13/00 | 10:02:37 | <Chris> | However, the principles of tape reading told me that taking profits after 2 price spikes after resistance is broken takes me out of the trade as I normally sell 1/2 lot and 1/2 lot at these points. |
| 12/13/00 | 10:03:15 | <Chris> | By doing so, I missed out on another 1 1/2 potential but the trade was traded based on principles that tell me when to exit. |
| 12/13/00 | 10:04:08 | <Chris> | For those that are better holders of a stock than I am (I am positive there are many) |
| 12/13/00 | 10:04:37 | <Chris> | they could simply follow the same principles and exit on the next spike between 25 1/2 to 26. |
| 12/13/00 | 10:04:48 | <Chris> | Once again, look at the volume and the price correlation at 10:46. |
| 12/13/00 | 10:04:57 | <Chris> | Price moves higher, volume spikes. |
| 12/13/00 | 10:05:04 | <Chris> | Move on that spike ends. |
| 12/13/00 | 10:06:09 | <Chris> | Eventually your time frame for the trade gets too long, but this depends on you. My intuitive state does not last that long for each trade and very tough for me personally to hold a stock all day when the action/principles of tape are telling me to exit. |
| 12/13/00 | 10:06:29 | <Chris> | Now, let's go back to an issue I touched on earlier and then end it here. |
| 12/13/00 | 10:06:47 | <Chris> | I said that tape reading does not rely on predictions/patterns/expectations, etc. |
| 12/13/00 | 10:06:53 | <Chris> | Price and volume show us when to enter/exit |
| 12/13/00 | 10:07:22 | <Chris> | We do however have to realize when to be aggressive and passive in these setups offered. |
| 12/13/00 | 10:07:32 | <Chris> | Monday and Tuesday morning were strong days, trends were great. |
| 12/13/00 | 10:07:47 | <Chris> | Playing setups was to be honest :)...fun. |
| 12/13/00 | 10:08:27 | <Chris> | However, we had an afternoon that slowed considerably and it carried over today. |
| 12/13/00 | 10:08:46 | <Chris> | This morning trading activity went way down because those same setups were not offering as much follow through. |
| 12/13/00 | 10:08:57 | <Chris> | however, notice that the principles of tape reading did not change. |
| 12/13/00 | 10:09:04 | <Chris> | They are still based on price/volume |
| 12/13/00 | 10:09:16 | <Chris> | it was the rate at which the price/volume was moving that changed. |
| 12/13/00 | 10:09:32 | <Chris> | We didn't have to pick an aribitrary indicator and hope other stocks followed it. |
| 12/13/00 | 10:09:41 | <Chris> | We didn't have to guess which way the market would go. |
| 12/13/00 | 10:10:16 | <Chris> | We didn't have to pick patterns based on broader trends and develop weak expectations that may or may not have happened. |
| 12/13/00 | 10:10:20 | <Chris> | What we did do was: |
| 12/13/00 | 10:10:27 | <Chris> | Watched to see how setups were doing. |
| 12/13/00 | 10:10:33 | <Chris> | They weren't as great today. |
| 12/13/00 | 10:10:45 | <Chris> | So we either back off trading/aggression or |
| 12/13/00 | 10:10:55 | <Chris> | for more experienced traders, we could fade the setups. |
| 12/13/00 | 10:11:24 | <Chris> | Meaning if the breakout occurs, and we see them being weak, we can go short the volume spike and look for failed b/o play to yield potential on the short side. |
| 12/13/00 | 10:11:51 | <Chris> | And with this, I'd like to take any questions if there are any. |
| 12/13/00 | 10:11:57 | <Chris> | This room is now unmoderated. Everyone may speak again. |
| 12/13/00 | 10:12:14 | <Larisa> | thank you for great class, Chris ! |
| 12/13/00 | 10:12:28 | <ennui> | Another informative class. Thanks. |
| 12/13/00 | 10:12:48 | <Chris> | Welcome :), any questions anyone? |
| 12/13/00 | 10:12:59 | <Chris> | or is this the smartest room of traders around? :) |
| 12/13/00 | 10:13:15 | <Larisa> | yes it is :) |
| 12/13/00 | 10:13:17 | <Chris> | If no answer, I'll assume the latter :) |
| 12/13/00 | 10:13:26 | <Chris> | Okay gang, thanks for your attention. |
| 12/13/00 | 10:13:34 | <Chris> | let's get back to ""watching"" this market :) |
| 12/13/00 | 10:14:28 | <yash> | wher I can get the book? |
| 12/13/00 | 10:14:30 | <Threei> | thank you Chris, great one |
| 12/13/00 | 10:14:34 | <Chris> | Free RT Training Workbook at http://www.realitytrader.com/workbook. |
| 12/13/00 | 10:14:52 | <Chris> | your password is in your welcome trial message email |
| 12/13/00 | 10:15:02 | <Chris> | if you don't have username/password, contact our admin |