Wednesday, December 2, 2009

What are YOU looking to do?

As traders it is important for each of us to have a well thought out game plan and execute that specific game plan. Executing your game plan means doing the work necessary to prepare for the day ahead and when you see your setup going after it.

This morning there was some two way action in the market. Although it wasn't spectacular, there were things to be done, and trades to be had. However, I found myself not finding "my setup" until an hour into the trading session: that setup involved CMI

CMI had many of the characteristics that I personally look for when looking to get involved in a "weak/strong" name.

  • Divergence with the market
  • Higher volume on down moves
  • Smaller volume on consolidations and retracements
  • Sector support (JOYG , BUCY, DE & CAT all down on the day)
  • Aggressive option buyers: having to "pay up to get filled"
If you look at the chart below you will see that CMI tipped its hand today, and when the market began its pullback (albeit a minimal 5 handle pullback) CMI extended its move down. Although it wasn't an "easy" trade, at one point pulling back 50 cents, the trend for CMI was consistent as it headed lower and eventually made new lows on the day.

Missing marginal trades, that are NOT your setup is part of the game- we can't be in every trade. However, when you see your setup you have to take advantage.


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