Throughout the trading day, our team of experienced traders will sort through thousands of stocks in order to find potential trading setups for our subscribers. Our analysts will then send out the alerts in the form of written analysis and charts to our subscribers.
We give you the technical rationale that explains why a pattern in a stock is worth looking at, and we tell what the possible outcomes may be.
While we know of many professional institutional and private traders who use Insights from the War Room, it is especially valuable for the less experienced beginning traders.
For those of you who have not yet learned how find daily and intraday setups in this fast moving market, let us be your eyes. We will find the setups for you. You just take note of them and monitor the stocks to see if the patterns follow through. From there, you'd decide whether you should enter the trade.
The commentaries can also serve as great trading lessons for beginners as you will learn what we look for and the thought process we apply in identifying good trading setups.
In the next few pages, we will show you some sample alerts we post throughout a normal trading day.
Example
On 7/14/00, one of our analysts posted the following alert:
15:40:14
The Kohl's Corp. (KSS) is pulling back from its high for the third straight day. Traders are now watching for the signal that the stock is turning back upward. This usually occurs when the stock trades above the high third day
of the pull back. KSS holds 3-month relative strength rating of 98 from the TradingMarkets.com Stock Scanner and is now trading up 1 1/4 to 62 3/4 in Friday's session.
Let’s check the chart on KSS:
1. The first thing to notice is that KSS had made a new 52-week high just three days ago.
2. We see that KSS had been pulling back for three straight days (today is labeled as day 3 in blue) in lower volume. Our analyst mentioned in the alert that KSS is in the third straight day of pullbacks from the high hinting this maybe a possible 1-2-3-4 setup. This setup is often mentioned and used by Jeff Cooper. As Jeff mentioned in his book Hit and Run Trading, strongly trending stocks often will rest for three days before resuming their move. By waiting for the pause, traders who identify the pattern can then jump on the stock before it takes off again. Our War Room analysts constantly scan for those types of pattern setups and report to our subscribers in real time.
3. As mentioned in the alert, the stock traded above the day three's high on the next trading day--signaling a turn around. That tells us that it's time to go long.
4. KSS traded 4 points higher from our entry point, three days later.
This is just one example of our many alerts in TradersWire. The thing to keep in mind is that while some alerts get triggered and result in significant price moves, other alerts never trigger our entry. The key here is to wait for signal of momentum continuation and use proper money management. (We will talk about money and risk management in Week 5 of our course.)
Let’s now check out an intraday alert.
Sonus Networks (SONS)
On 8/7/00, an intraday setup alert caught my eye:
11:28:34
Intraday Setup Alert
Sonus Networks (SONS) has formed a small intraday pennant. Traders will be watching for the stock to make a move out of the formation. SONS is currently up 18 to 236.
Up 18?! Are you kidding me? This was the first thought that ran across my mind.
Looking at the 5-minute chart of SONS:
1. SONS closed at 218 and opened today at 223.
2. SONS traded to as high as 240 before pulling back and consolidating. We got the alert of SONS forming a pennant at 11:28. We know that a stock forming a pennant can go either way. However, with a strong uptrending stock like SONS, it’s most likely to resume its upward movement, so we will look for any strength on a breakout.
Within five minutes of the last alert, we got a new one:
11:32:12
Sonus Networks (SONS) has popped up out of the pattern in our 11:28 post, now up 19 1/2 to 237 1/2.
Now, let’s check the 5-minute chart again:
1. SONS broke out of the pennant which told alert traders to go long on the stock.
2. After an initial pop, SONS started trading sideways again. Traders would then watch it closely for another breakout.
3. Boom! It popped again, providing a second chance for longs.
4. See the bullish flag it formed? It was amazing how much strength this stock had. It broke out of the flag and kept going. At the end of day SONS gave us a good 20 plus points profit from our first entry.
This is just one of many intraday setups we find for our subscribers every day. Don’t you just wish all our alerts ended up with this kind of point movement?