Monday, October 18, 2004

Plans straight from the war room -- uncensored

Different kind of post tonite. I'll cut straight to the chase. I had a bad trading day today and when that happens, my intensity goes straight through the roof. I'm not messing around with trying to follow a dozen stocks tomorrow like I usually tend to do. My watch list is only two stock for tomorrow: CAAS and WLDA. Both are low-floaters that have tiny windows of opportunity for traders like me to enter a position.

CAAS did a curious thing today. It gapped down this morning, but there was no volume to it. Price and volume steadily rose all day until the final crescendo at the close where we saw 6 digit volume in a 10 minute block for the first time all day. The price swings of this stock have been wild so I cannot afford to mess this up. For me to enter this stock, I need to get in when it makes a new high at $12.65. CAAS closed at $12.10 and finished after hours trading at $12.38. If everything works out perfectly, the stock will open at around $12.10 and trade all the way up to $12.66 in the first few minutes. I want to see volume greater than 75,000 in the first 5 minutes, and nothing but upward price moves. If CAAS gaps up over $13, then I will have to wait for a better entry point. If it starts trading up incredibly fast at the open with what looks like heavy volume, my chances are worse, but I will put the buy order in ASAP. I will set my downside stop at 4% since this stock is way extended, and re-evaluate throughout the day whether my stop needs to be moved up or not. Probably the only way I will stay in this stock is if it goes up and stays up tomorrow. So to re-cap:

CAAS plan A (first 5 minutes of trading day)

1) The volume within the first 5 minutes is > 75,000
2) The price is between $12.66 and $13 and heading higher.
3) Stop will be placed approximetely 4% below my purchase price (about $0.50).

CAAS plan B (gap up)

1) Gauge the volume to see if it will likely be above 1 million shares in the day.
2) PATIENTLY wait for a breakout from a consolidation above $12.65 during the trading day.
3) Buy if the current 10-minute bar is on track for a six-digit volume during the breakout. Place stop slightly below the consolidation area.

WLDA looks like it may be forming a bottom so what I am looking for is a confirmation of a change in the trend. The most compeling scenario for me would be a close above $6.00 a share at the top of the intra-day price range on at least 4 million volume. To be on track for this, it must trade at least a half a million shares in the first hour of trading. I'll need to see six digit volume in the first 10 minute bar tomorrow if I am going to get in near the open. WLDA went into an intra-day consolidation at the top of the range today with a high of $5.68, so I'd like to enter a position on a breakout above that intra-day high. It looks like there might be some resistance around $6.10 where it gapped down from a few days ago, and again at $6.50 so those prices might give a second chance for entering WLDA.
Again, I'd like my downside stop about 4% below my entry point because I don't want to take any chances with this risky stock. It is either going straight up, or I am out.

WLDA plan A

1) Six digits of volume in the first 10 minutes
2) Share price above $5.68

WLDA plan B

1)The volume has been heavy enough throughout the day to reach around 4 million by close.
2) WLDA consolidates around $6.10 or $6.50.
3) Buy off of a 10-minute 6 digit volume breakout from one of the above listed consolidations.


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