Real-Time Comments on QCOM Breakout Trade at 74

Training Session on QCOM Breakout Trade

<@Chris>  Today I'd like to go over the QCOM chart from November 13.
<@Chris>  www.realitytrader.com/calls/qcom.htm
<@Chris>  First thing we have on the chart is a nice move from the 73 to 74 area on relatively stable volume
<@Chris>  There was a bit of a price spike bar right to 74 where those in from lower levels would have been exiting into.
<@Chris>  As the stock began to pull back from the 74 level, we notice a shallow pullback to 73 5/8.
<@Chris>  Therefore, we established the range from 73 5/8 to 74.
<@Chris>  The broader trend continued to show strength during this time period and QCOM is one that may follow a broader trend a bit better than
others.
<@Chris>  The trader has two options in this case:
<@Chris>  The first option is to buy the low the mini range, in this case, buy at 5/8 with a bid or 11/16 if you feel 5/8 isn't able to be attained.
<@Chris>  In either case, selling at 5/8 and you need to get ready for the stop exit.
<@Chris>  As we saw QCOM yesterday, when selling picks up on it, taking a reasonable stop can become more difficult.
<@Chris>  Therefore, I wouldn't be as willing to wait for confirmation of the break if it were to retest lows.
<@Chris>  If bid gets thin, selling picks up, ECNs most likely drop
<@Chris>  MM order queues get full
<@Chris>  harder to get out at inside levels unless you are first
<@Chris>  If trader wished to bid QCOM, they could scalp within the range or wait for the break.
<@Chris>  In this case, the stock made a break of the high offering the setup for a buy trade.
<@Chris>  Buy for a breakout with a stop at 73 5/8.
<@Chris>  We saw the initial break being weak and the stock price came back down to 73 11/16 and held.
<@Chris>  At this point, any selling at 11/16 and I'd be ready to hit the bid fast for exit.
<@Chris>  Many times, a failed breakout makes a great short.
<@Chris>  We wouldn't want to get caught in stronger selling.
<@Chris>  WIth the hold of the low mini range, and move back to new highs, we were looking for a reasonable exit strategy.
<@Chris>  The price spike bar that put us to near 74 3/4 was the area for this.
<@Chris>  We can see both a price spike associated with a volume spike in this area.
<@Chris>  This is where traders would exit at least 1/2 of their positions, and raising stop to near breakeven if not absolute breakeven on the rest.
<@Chris>  I used 73 7/8 in this case as I wanted to use 74, previous resistance, to now serve as support.
<@Chris>  If 74 failed, I'd hit available ECN/MM at no worse than 7/8 if I could get it.
<@Chris>  From this point we see a nice basing for about 20 minutes
<@Chris>  In this case, we wanted to raise stop to the 74 1/2 level which was serving as the bottom of the mini range during this period.
<@Chris>  Any break of that and we would take rest of our shares at 74 3/8.
<@Chris>  BRUT was showing good size at 3/8 and rather than fight with the 2 MMs at 7/16, I'd just hit BRUT and be done with it.
<@Chris>  Fortunately the 1/2 level held and made a break of the 75 level.
<@Chris>  Notice on the pullback to 74 1/2, we see a inclining volume rise leading to a volume spike at about 2:05 on the chart.
<@Chris>  This is the next point at which traders will look to exit the remaining shares. The 74 1/2 level wasn't jeopardized so anyone holding for the break of the 75 level would be lookign to exit into this spike.
<@Chris>  Taking profits within the 74 1/2 to 75 range was reasonable, I would have no problem with it.
<@Chris>  For those that held, this is the action that they would be looking to exit into on anything remaining.
<@Chris>  As we moved to the 76 area we notice the volume dropped considerably and the Market Participants were jumping on and off levels making the trade hard to read.
<@Chris>  At the point the stock becomes harder to read, this is where we'd certainly be looking to exit if we hadn't already into the price/volume spike.
<@Chris>  From this exit, you can see the volatility on the issue as the day wore on.
<@Chris>  There were a few more possibilities, but in remembering the action, the action was jumpy, erratic, harder to read.
<@Chris>  In these cases, it's best to back off when readability and execution risk becomes higher.
<@Chris>  So once again, this is a nice example of a breakout trade from a mini range established.
<@Chris>  Using price/volume spikes to define the exit strategy.
<@Chris>  When viewing this on the Level 2 screen.
<@Chris>  As we approach it from a Tape Reading point of view.
<@Chris>  You will see pace increase using the following visual
<@Chris>  Bring up BEAS on the Level 2 for me
<@Chris>  You can see T/S scroling faster and MPs aren't staying at levels for very long
<@Chris>  trading looks erratic
<@Chris>  hard to read
<@Chris>  when you have this type of action after a move higher like BEAS just had
<@Chris>  it's best to exit into such uncertainty
<@Chris>  But this kind of action is representative of what we mean by
wanting to exit into such a spike either in volume or priice or in the combinaation of both.