Longer term gap breakaway strategy: Link to livestream: http://livestre.am/NmqO Notes from Livestream: -Has to be breakaway gap from current longer term trend -Gaps breaking away from tops of long term trends OR breaking away to the upside of the bottom of long term down trends -Has to be a MAJOR gap that cuts away from the entire range -Example 5/26/11 HGG -The more things it cuts through like moving averages, a short term patterns, a multi month pattern, and the more damage/pressure it delivers in regards to breaking current long term trend, the stronger the move is. -Volume should be incredibly high -Be careful not confuse gaps with exhaustion or continuation or area gaps. -These happen all through earnings season. Scale out or exit position before next earnings. -Low maintenance, daily chart glances, and be patient. -Can re-test levels below your entry and require months. -Have to have the big picture in mind. No weekly charts, not the right time period. -As each earnings season comes around, your positions get recycled. Exiting current positions and adding new ones. -Must make sure YOU do not screw up the gaps. Don't get emotional. Don't watch intraday. Glancing once a day is fine, preferably end of day. -Start with small position, then gradually add with continuation gaps. -You will have losses, but they're not as common as wins. -Everything must line up. Works for upside and downside breakaway gaps. -Cleaner the chart the better. Nice clean trend. -Stops are case by case, slightly below gap fill, long white or red candle, give it to high or low of candle. Gap/size of candle determines where to place stop. Usually should
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Transcript
Longer term gap breakaway strategy:
Link to livestream: http://livestre.am/NmqO
Notes from Livestream:
-Has to be breakaway gap from current longer term trend-Gaps breaking away from tops of long term trends OR breaking away to the upside of the bottom of long term down trends-Has to be a MAJOR gap that cuts away from the entire range-Example 5/26/11 HGG-The more things it cuts through like moving averages, a short term patterns, a multi month pattern, and the more damage/pressure it delivers in regards to breaking current long term trend, the stronger the move is.-Volume should be incredibly high -Be careful not confuse gaps with exhaustion or continuation or area gaps.-These happen all through earnings season. Scale out or exit position before next earnings. -Low maintenance, daily chart glances, and be patient.-Can re-test levels below your entry and require months.-Have to have the big picture in mind. No weekly charts, not the right time period.-As each earnings season comes around, your positions get recycled. Exiting current positions and adding new ones.-Must make sure YOU do not screw up the gaps. Don't get emotional. Don't watch intraday. Glancing once a day is fine, preferably end of day.-Start with small position, then gradually add with continuation gaps. -You will have losses, but they're not as common as wins.-Everything must line up. Works for upside and downside breakaway gaps.-Cleaner the chart the better. Nice clean trend.-Stops are case by case, slightly below gap fill, long white or red candle, give it to high or low of candle. Gap/size of candle determines where to place stop. Usually should not exceed high/low of breakaway down/up candle. MA's make a difference. You can always ask JL for advice.-Aggressive entry at open or conservative at end of day.-Plant the seed and let it grow… let it do it's thing. Treat it like a plant!!! It takes time.-Closer to longer term tops or bottoms are the best possibilities.
John Lee: breakaway gap that effectively ends a year-long decline
May 26 2011, 4:33 PM
John Lee: stop would likely be below the 200-day, but its going to take time for the 200-day to slope positive
May 26 2011, 4:33 PM
John Lee: but they're actually looking for buyers to be acquired so that might be a bit catalyst driven in the future
May 26 2011, 4:34 PM
John Lee: this is the longer-term strategy for earnings gaps
May 26 2011, 4:34 PM
John Lee: primarily breakaway gaps ONLY at tops and bottoms of trends with the breakaway starting a new, opposite trend
May 26 2011, 4:34 PM
John Lee: which will take months to materialize
May 26 2011, 4:34 PM
John Lee: but well worth the wait
May 26 2011, 4:34 PM
mhass33: ok i see
May 26 2011, 4:34 PM
John Lee: and you would reload the portfolio about 3-4 times a year, so a 300-400% turnover rate
May 26 2011, 4:35 PM
mhass33: so what ur saying is the breakaway in DELL back in february didnt happen at a bottom
May 26 2011, 4:35 PM
John Lee: dont expect to hold **** for a year or longer with this
May 26 2011, 4:35 PM
John Lee: and dell is just not worth anyone's time
May 26 2011, 4:35 PM
John Lee: thats a very questionable gap
May 26 2011, 4:35 PM
mhass33: i just saw a breakaway coincide with a long term trendline so i thought it was significant
May 26 2011, 4:36 PM
RickH: would you play these kinds of trades now with the market neutral, or would you wait for market to be breaking to new highs before initiating?
May 26 2011, 4:37 PM
John Lee: doesnt matter actuallyu
May 26 2011, 4:37 PM
John Lee: the key components must be met however
May 26 2011, 4:37 PM
RickH: you can play these longs is a down market too?
May 26 2011, 4:37 PM
John Lee: i just gave them
May 26 2011, 4:38 PM
John Lee: and another thing, dont have too much money in any one posittion
May 26 2011, 4:38 PM
John Lee: they have to spread equally
May 26 2011, 4:39 PM
John Lee: taking money away from other positions to add to the other positions would sometimes rob that latter position from reaching its potential
May 26 2011, 4:39 PM
mhass33: so do you give a 10% stop or do you try to find a reasonable support level within that percentage range
May 26 2011, 4:39 PM
mhass33: cuz u mentioned double digit loss level
May 26 2011, 4:39 PM
John Lee: many of these trades end when there is a opposite breakaway gap, obviously its better to get out before that, but thats when u pay attention to when they report earnnigs next, so it can be avoided
May 26 2011, 4:39 PM
John Lee: 10% wouldnt be enough initially in most cases
May 26 2011, 4:40 PM
John Lee: i already covered this
May 26 2011, 4:41 PM
John Lee: ok so
May 26 2011, 4:41 PM
John Lee: maybe i should get on livestream or something
May 26 2011, 4:42 PM
kenjohns6: Shoot, I have to go meet a **** electrician at my rental!
May 26 2011, 4:42 PM
John Lee: which rental is this
May 26 2011, 4:42 PM
kenjohns6: ok, if you do go I'll just listen later
May 26 2011, 4:42 PM
kenjohns6: family one I'm rehabbing
May 26 2011, 4:42 PM
kenjohns6: be finished this weekend
May 26 2011, 4:42 PM
kenjohns6: then I'm free until they call me and say a lightbulb went out
May 26 2011, 4:44 PM
John Lee: oh cool
May 26 2011, 4:44 PM
kenjohns6: I can copy all the notes from the archives and save your recording to my drives to put in my master TA archives
May 26 2011, 4:44 PM
John Lee: i have a rehab in baltimore which i am currently not working on in buthers hill
May 26 2011, 4:44 PM
John Lee: butchers
May 26 2011, 4:44 PM
kenjohns6: not working on?
May 26 2011, 4:44 PM
kenjohns6: really?
May 26 2011, 4:44 PM
John Lee: yea well i have other **** to do
May 26 2011, 4:44 PM
John Lee: lol
May 26 2011, 4:44 PM
kenjohns6: haha
May 26 2011, 4:44 PM
kenjohns6: obviously
May 26 2011, 4:44 PM
kenjohns6: that's awesome
livestream
May 26 2011, 4:45 PM
John Lee: http://www.livestream.com/chartsgonewild
chartsgonewild - live streaming video powered by Livestream
mhass33: dam i owned FTK from 1.68 in october and sold around 3 bucks
May 26 2011, 5:32 PM
mhass33: wish i knew about this strategy then
May 26 2011, 5:33 PM
hakahaka: what increments do you scale in relative to projected full position?
May 26 2011, 5:35 PM
RickH: so a stop on HGG at ~12.40, or would you choose ~ 13 with the 20 and 50 there?
May 26 2011, 5:40 PM
mhass33: haha
May 26 2011, 5:41 PM
mhass33: ok how bout CLNE end of march
May 26 2011, 5:41 PM
mhass33: didnt follow through
May 26 2011, 5:42 PM
mhass33: im just trying to get an idea of potential fails
May 26 2011, 5:44 PM
RickH: how many of these do you have on at one time, you rotate around 3-5 or so depending on what crops up? and position size, are these 2-5% size, or do you go as high as 10%. sorry if you covered these parts, just let me know and i will listen again, i missed a few mins
May 26 2011, 5:45 PM
RickH: i would guess the more you do the more it smooths out the odds too. but over market trend is not a consideration?
May 26 2011, 5:46 PM
mhass33: holy **** AVD broke the hell out this is the one i was talking about the other night
May 26 2011, 5:46 PM
mhass33: if that was a gap that would prob be good
May 26 2011, 5:46 PM
RickH: *but overall market trend is not a consideration?