B&B Within Daily Hammer

B&B Within Daily Hammer - Patriot Coal Corp. (Public, NYSE:PCX); Potash Corp. (Public, NYSE: POT)
Jamie is taking the remainder of this week off. It is OPEX week and the market has been extremely choppy of late. I too was not expecting many good setups this week.

One of the things I do (as a part-time trader) is check the market several times per day and see if anything grabs my attention. As I was checking my watchlist this afternoon, I saw that PCX had hammered off of the daily 50sma (left chart below) with capitulation action intraday and had setup a nice B&B pattern on the 15min chart (right chart below). Notice the matching congestion areas at roughly the same price level on the 15min. Unfortunately, the BO in PCX had just occurred (within 2:00 pm bar) and I felt that I had missed the optimal entry point. As it turned out, I could have entered late and still made a nice profit.

A good practice when you have just missed a solid setup is to quickly look for a similar setup that has yet to BO. Within a minute or two I identified a similar setup in POT. Notice the hammer action (long lower tail) at the daily PP line and the matching congestions on the 15min chart. On the 15min, POT had just retraced to test the rising 20ema (and 5ema) and was starting to bounce. Given the similar of the setups and the relative strength of the POT daily chart, I entered immediately. After further analysis, I realized that POT had sloppier action and less basing (relative to PCX). With this in mind, I took a relative quick exit with my full position just above the round number $225. As it turned out, I left some profit on the table. This is fine as I achieved a nice reward-to-risk ratio and did not have to endure any retracement action in a very choppy market overall. online motrin

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