Trade Review: Opening Range Breakout

Yesterday I mentioned in my weekend review that I felt the market right now is frothy and as such I was going to be more discriminating in my set-up selection and focus upon beaten down or highly shorted stocks. I considered taking smaller positions with wider stops to adjust for volatility as an option, but decided instead to look for short-term opportunities for a day trade. One stock that caught my eye was WNR.

Recently I came to a fundamental shift in my trading philosophy. This shift in awareness occurred serendipitously in April when I attended a trading seminar by Pradeep Bonde at StockBee as well as coming across three books, 'Day Trading With Short Term Price Patterns and Opening Range Breakout' by Tony Crable, 'Hit and Run Trading' by Jeff Cooper, and 'Trading the 10 O'clock Bulls' by Geoff Bysshe.

One of the central principles is that from range contraction comes range expansion and that price tends to move in the direction of this expansion. To gauge range contraction I focus specifically on the same price pattern used by Crable, Narrow Range 7 and Inside Day 4. After the close of the market I scan through my set-ups and watch list for stocks that meet this price bar pattern and place it on a list of 12 that I will watch for the open.


Regarding range expansion, Jeff Cooper notes, “Over the years, I have observed the number of times a stock will trade around its 50-Day moving average for a period of time, and then without warning, explode either to the upside or downside.”


When preparing for this week and making watch list I noted a scan that a number of oil/refineries were in the top 20 and one in particular stood out, WNR. In addition to what I believe to be constructive price action, there was an ID4 that touched the 50MA. As an added bonus, according to FinViz 25% of the float on this is short. I considered this a low risk trade that if triggered should work immediately with price confirming in the direction of the break.

WNR

So now that I had the set up I simple waited until the trigger, a break of the opening range high.  At first my bias was to the downside as there was a price gap up/fade on the open so I set a reminder alert in case there was a reversal and entry signal later in the session.

WNR OR

I differ slightly from what Jeff Cooper considers a Range Expansion.  For consistency with NR7 I use a WR7 which WNR met at the end of the day. Under more preferred market conditions I would have held this for a swing but given my belief that this is market is has breadth issues I opted to sell the position.


Another trade I took today was HAIN which I've been watching for weeks now after it had an earnings break out. 3 days ago a logical pivot low was established confirmed by a higher close the next day. I felt confident about this stock given that it is catalyst driven, confirmed a logical start to a swing and had an inside day 4.

HAIN

This triggered an entry signal early which I took, unfortunately sometimes even the best laid plans... My exit was very premature.

HAIN OR