SMB Radar Play ACOM

Jan 22nd, 2012 | By | Category: SMB Radar, Steven Spencer (Steve's) Blogs
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we received the following email from a Radar subscriber today (post originally written january 9th):

Subject: SMB Radar play in ACOM today

Question:
Dear Bella,
I am trying to develop certain plays based on the SMB Radar that I call SMB Radar Strong and SMB Radar Weak. My thoughts are that I’ll check the names on the strong and weak today lists and then look for appropriate entries with good risk/reward parameters. I do this after the opening drive (around 10-10:15 am)

Today, ACOM was at the top of the weak today list. Unfortunately, I missed the trade and actually tweeted that on stock twits. My thought at the time was that a bear flag was developing on the 5 min chart at 10:10 am. Even though I missed that, I know I would have been hesitant pulling the trigger given the large move down earlier and short term support at 27.45 and 27.31. Also missed the break out short at 26.83 in the pm session. :(

My question is simply to ask if you guys use the SMB Radar in that fashion, and if so, how would you have traded ACOM today?

Thanks for your time. SMB Radar is a great tool that I’m trying to use to the fullest. Every day I realize how vital it is to my trading success.

Greg

Spencer’s answer:

We definitely use the Radar to scan for good setups in the strongest and weakest stocks that are In Play. If you check the right hand column on the blog under “SMB Radar” you will find multiple posts discussing the “Spencer Special”. These are stocks that have had an Opening Drive and then have a tight horizontal consolidation before a continuation of their trend. This is my favorite intraday setup right now and I even worked with a programmer to grey box it recently.

As for your question on ACOM. Your assessment was right that it was developing a Bear Flag. To be more precise the consolidation was a descending triangle with well defined support. Your initial entry from the chart would be when it breaches support at 27.65 with a stop above the most recent “lower high” at 27.78 on the 5 minute chart.

Once you were in the trade there was no reason based on technicals to get flat before the close. It made a couple of feeble attempts at bouncing at the 27 level but by 1:15 had started to hold below with a tight consolidation around 27.90 offering a chance to add to the position. This trade definitely took awhile to develop so it would have tried most traders’ patience but a failure to have two consecutive up moves on the 5 minute was enough to keep you in the trade until 4PM or a possible swing.

As for you concern about the short term levels you mentioned I wouldn’t let those keep you from entering a trade that is In Play on the Radar and #1 on the Radar Weak list. Those stocks tend to follow through. Just pay attention to the level to see if there is unusual support and if so exit the position.

Steven Spencer is the co-founder of SMB Capital and SMB Training and has traded professionally for over 15 years. For a 14 Day Trial to the SMB Radar click Here.

No relevant positions

  • p1

    i assume with your style steven that you peeled some of the position off on your risk/reward on this setup and try to trial a core piece or do you try to hold entire position until close/taken out by trailing stop?

  • Orlandog1

    Steve,
    Thank you very much for your time.  That was great.  I’m finding the SMB Radar very helpful in finding great risk/reward plays. Awesome tool when used correctly.

  • http://twitter.com/amcno03 J. Restrepo

    Steve, 
    Thanks for sharing your thoughts.
    Just one question, in this paragraph “…at the 27 level but by 1:15 had started to hold below with a tight consolidation around 27.90 offering a chance to add …” , you meant 26.90, right?
    Best regards.