Kane Trading - Education for Serious Traders

					January 12, 2004 Commentary- Well, there was never any doubt about what I would be writing about in today's commentary. It was decided before the market opened this morning. Let's go back to the last commentary, from this weekend. In that column I said: "FDX gave a small bounce off the top of the first grouping, and has since plunged down to the middle of the second grouping. This is the point that I'm now looking for an entry trigger." I got my trigger all right. Let's start with the daily chart, as it looked at Friday's close. I'll put two horizontal lines on the chart to show the boundaries of the lower grouping. I'll also highlight the pattern. Let's move ahead now to what happened today. I'll add today's price bar to the chart. BAMM! So much for the plunging price action and the weak closes. FDX took out four days highs and almost took out the high from the entire last week in one shot. What happened? The news I heard was that Bear Stearns upgraded FDX to 'outperform' from 'peer perform'. I only have one thing to say about that: Hmmm. FDX is doing nothing but going down. I pull together a grouping that has very poorly known retracements from over 5 years ago. FDX hits the potential trade area and I comment that I'm now ready to take an entry if I get a trigger. Take a moment and look back once more at the first chart and visualize the situation. Then before the market opens FDX gets upgraded. Not to 'strong buy' or anything like that, but to 'outperform'. I am not going to comment any more on that topic (because I know that you know exactly what I'm thinking). And FDX goes crazy. Is this a 'coincidence'? I can't say for sure. But if it is, it's a 'coincidence' that I seem to see repeated over and over. Fascinating, huh? Now, from a practical standpoint, did I see a chance to get into FDX today? Let's start with the 5-minute chart, showing the open. When I saw the upgrade and the indications for the open, I knew it was a now or never situation. I was thinking one of two scenarios was likely to play out. It was either going to be a 'gap trap' and the open would be near the high print of the day, or the open was going to be near the low, as FDX would just keep going up all day. My plan was to get in if I didn't see FDX make a serious move towards closing the gap in the first five to fifteen minutes. Normally I don't like to play moves like this, but I've been watching this FDX play for a while, and I wasn't going to miss it on a gap and run. I could always set a stop just below my entry area and stop out if it didn't go. And what about my entry trigger(s)? Every one of them was triggered on the gap open. The only issue was buying up so far. Let's see how FDX looked a half hour into the session. I almost went in on that third bar, but decided to wait. That might have cost me an entry. When I saw the pullback and then FDX started up again, I was triggered in. I was watching this on the 1-minute chart for my trigger. If you pull the 1-minute chart up you can see the multiple trigger opportunities that came in the first 30-45 minutes of trading. My stop was just below the low print of the day. If my read was correct, FDX should blast off. Let's move to the 15-minute chart and see what happened from here. I'll put an arrow on the chart to show the area of my entry. My read played out very well this time. Even if it didn't, I felt that the odds were in my favor to play this one if the gap didn't start to close quickly. I thought the reward/risk (now why does he call it reward/risk, and not risk/reward, like everyone else?) was favorable. I liked the probabilities, and that wouldn't change if this one setup didn't work. We'll see where FDX goes from here. I'm now in management mode, just like with VTSS. I'll update these plays, and the others that we are watching, as things of interest happen. If you have the inclination, take a look at FISV on a few different timeframes and think about how you might assess this one.


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