Trade – BIIB - 28th April 2004

In this column I will be posting up trades every now and then. I don’t know about you, but I find that looking at other peoples charts and their explanation of what they see, can open my eyes to new types of opportunities. Although I believe strongly in choosing a trading style and sticking with it, I also believe it’s good to keep an open mind and see what other folk are doing; sometimes looking at someone else’s trades can get you to see a chart in a totally different light. So I hope the trades I post here are useful.

To kick us off, here is a nice simple trade on BIIB, a stock I like to keep an eye on every day because it often makes quick and very predictable moves that are easy to profit from.

You will see from the chart that I don’t use indicators for the most part, that’s a subject worth an article of it’s own so maybe I will come back to that in the future. In the meantime, here is how I saw the chart unfold.

The stock gapped down at the open, the red line is the previous days low so we can see that the price gapped outside of the previous days trading range. It tried to go back up and close the gap, but failed miserably, didn’t even get back inside the previous days range. After bouncing around for a bit, it eventually narrowed it’s range and we see several relatively smaller candles as it consolidated around the $59 area. In fact on this five minute chart, the price had made a classic descending triangle shape. This to me looked like a stock that had little chance of going up, and so having already seen how weak it was, it was highly likely to go down! As soon as the volume picked up, I put in a short order at $58.90 and got filled at $58.86. Initial Stop loss was 10c away – if it went back up that much it wasn’t going to do as I expected so the trade would have been a dud, although I would have kept an eye on it for another possible entry later. In the event it dropped nicely as expected, and I covered at $58.11 (when the tape showed clear support) for a 75c per share profit in around 10 minutes. So on 1000 shares that’s $750 before commissions, on 2000 shares, $1500 and so forth.

This sort of predictable low risk trade, producing a reasonable profit in a short space of time, pretty much embodies the type of trading I like. I don’t want to be hanging around waiting for ages to know if my trade is making me money or not, and that’s one of the reasons Nasdaq stocks are my main trading vehicle, plenty of opportunities every day to find easy trades like this.

Harvey can be contacted via his website, where you can also read about his day trading course