A Trade A Day

With oil apparently running up unabated, oil services and oil drillers are making money hand over fist. Someone needs to take Light Sweet Crude aside and explain to it the concept of Reversion to the Mean. It is so far outside of the mean, a correction would be dramatic. However, with the world’s unquenchable thirst for the black stuff combined with the exhaustion of cheap oil, perhaps we are seeing a new paradigm take shape in commodities, oil related anyway.

Which brings us to APA. This stock has already run up which is a positive considering I want to put my money in stocks that are the best. What I need is an opportunity to get in where the risk is low.

Now depending on how you determine consolidations, I see that APA has consolidated twice since it’s breakout over 87 on 9/20. After three consolidations and breakouts, the breakouts tend to be less reliable and less explosive.

What works out well for APA is the gap down on 10/20 penetrated the previous breakout, which in my analysis resets the count.

APA is determined to continue its advance. I like the stock over 104.70

Also, If you’re into trading the indexes, there’s a slew of etf’s where the hammer pattern has formed. The problem is that I don’t see many with a good risk to reward.

Now, my particular strategy for trading hammers is to get at least a 3 to 1 return on my risk. The way I’m going to do that is pick a fast mover who’s swing high greater than a 3 to 1 ratio away from the top of the hammer. My scanning results show there are a lot of great patterns, but the risk/reward is not meeting my criteria. Check out ivv and ijt as an example of good patterns with less than ideal risk to reward. Sure, you might be able to squeeze 3R out of the trade, but a 3R move would require the market to resume it’s uptrend past the swing high. It may happen, but I would like to find something that’s less dependent on new highs by the indexes.

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