Here's something a little different. Rather than look at a stock from an intermediate-term trading perspective (which is what we tend to normally do), we will instead apply the same principles that we use on those charts to an intraday chart. The point is to demonstrate that these principles work no matter what the time frame.
The company we'll look at is
, which reported better-than-expected earnings and an improved outlook. That caused the stock to gap open to begin the day Tuesday and also caused it to work higher throughout the trading day.
Now, if you are like me and missed the move Tuesday, it isn't necessary that you simply write the stock off and say, "If only I had got in before the move." What you can do is apply the swing point concepts to the intraday chart and measure where to gain entry if the stock does retrace a bit Wednesday or in the coming days.
To start with, here's a daily chart showing the huge gap-up move on expanding volume.
You have to go to a monthly chart (not shown) to find the next resistance level, which is about $1 higher. After that, it's $21, $30 and finally $40.
Assuming JBL does pause and retrace, you want to be all over it for a trade if not more. And if it jumps $18 before the pause, the same ideas I share here apply as well at future intraday swing points.
So the question is, "How can you reduce risk while trying to board a rocket ship"? Well, it's the same thing you do when you are trying to board a slower moving bus of a trade: You analyze the swing points on the time frame you care to trade and measure your risk vs. your reward. It is only by doing this that you can put the odds on your side.
Let's look at an intraday chart of JBL to see what I mean.
The preceding is a 10-minute chart covering the past two days.
Just as we would do on a daily, weekly or monthly chart, it is important that you look to swing points that are created and measure how they were taken out. In the intraday chart, each of the 10-minute swing points that were created were taken out with volume. On this time frame, that would imply that the trend is
Those are your support points, and the volume numbers are what you compare to if, by chance, JBL pulls back into these price points. If it simply powers ahead, then you do the same thing going forward. You determine the intraday swing points, then measure the retrace when it comes (and it always occurs eventually) with respect to the volume that lies at those swing points.
In this example, if JBL retraces with less than 500,000 shares into the $16.50 area, you want to buy it. The same applies at $16.25. The large gap area has your back at $15.75, and you have to declare defeat and sell if prices continue to drop into the $15.22 area. Thus, the risk of entry is about $1.35 or so if your second buy is larger than the first. Your upside target is $18 minimum, but you are more likely to see an eventual push that will test $21 and maybe even $30.
The reason you buy the intraday retrace is to keep your risk at a level that you can handle and to keep from getting shaken out of the entry once you make it.
In summary, trading intraday swing points is really no different that trading daily or weekly swing points. The principles are the same and the results are reasonably the same as well. So until next time, keep trading the charts!
At the time of publication, Little had no position in Jabil Circuit
L.A. Little is an author, professional trader and money manager who writes daily on
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