Seven Trading Systems for the S&P Futures Gap Strategies to Day Trade the Opening Bell_6 pot

Make a checklist ofthe following items: Market | tin tion level el ¢ Custom tickers with filtering by symbol and volume * Quote lists with custom fields ¢ Access to all ECNs with adva

188 ‘9 Tools ofthe rede

COVER in Figure 98, there isan order to sll short 700 shares st 26.375 This is goed chart for sever reasons First, the stock s poised to break out off sym-

metrical trimgle formed over the past several weeks Second, today’s range is

cnly LOL, a fraction ofthe ATR of287, a good ristireward ratio Finiy, the

stock gapped down strongly on February 8°, so fear is built into the stock, On @

fundamental nete, Overture sold offapain after the last pivet high because ofa

competitive produc in the Internet advertising marketplace,

Figure 9.8 Overture Services Entry Order

‘The chan in Figure formed a triple bettom, andit is bounded by a large descending triangle, Based 9.9 is CACL The stock is in a four-day rectangle, it has

‘onthese conditions, the stock chart is bearish because the rectangle is unbiased,

the triple bottom is bearish and the descending triangle js bearish Since We

Ihave an Acme R entry, we can simply wail for a breakout in either direction Certainly, trader can have an opinion abou! a trade, but the epinion means

thing A:market opinion never matters except forthe shameless money man-

‘ages "talking their ook Either they are stuck in a position that needs a boost,

‘or they want to sell ata higher price-to you Be skeptical ofmarket gurus who

raise their equity weightings in public Ifthe gura works fora major investment

bank, then alt ofhis ing this news to the public is a chance to unload short-term trading positions er her ctients have been elued in the day before, and reteas-

For further information about these market gurus, read Niederbofiers hilarious

taxonomy of market forecasters

Figure9.9, CACTEntry Order

Update

“Today is Friday, March 1" We will now review each ofthe long and sheet tae entes ftom February 26° Fist the chast of EAST is shown in Fignse 9.10 As expected, pace broke the upper oat channel, and the trade was exited within

‘ovo days When a stock moves this quickly in two days profits should be taken (on halfofthe position Later that day, the remaining haifwas stopped out

=

mò 9 Tools ofthe Trade

Remember the chart of Business Objects? We thought that this was the weakest

chart, but this signal tured out to be the best trade (Figure 9.11) a testament to

‘gure 9.1, Business Objects Peston

“The Acme N short entry never triggered for OVER, as shown in Figure 91%:

however, it did break out ofits symmetrical triangle

Pigaee 9.12 Os

Figure 9.13 CACI Open Position

“The CACI rectangle in Figure 9.13 triggered to the short side with both an R ‘and FB signal After two days; the chart showed conviction in nether direction Although not shown hore, the following day, tho trade was stepped cut before # Uxce-point move to the upside ducing a masket rally

Overall, the systems performed better than our chart analysis, as is usually the case, The two long trades (EAST and BOBS) were clear winners, supported bythe milly in the Nasdag The short trade (CACD stayed flat during the mar-

‘Ket reversal but was eventually @ loser Finally, the remaining steck (OVER) did not rigger a trade (Next, we show the trader some inspirational chavts in Figures 9.14 and 9.15, {mn early 2902, Rent-a-Center (RCU:Nasdaq) had sn exceptional three-month Relative Strength reading of 97 During this period, all of the Acme entries

‘were long trades InJune 2001, the Relative Strength of Corporate Executive Beard (EXBD:Nasdag) was 95 Five log signals were generated in litle ver @

‘month Four ont offive trades were winners, and two ofthe long pesitions were

‘ereated with multiple trade entzies

‘The reason for presenting Hese charts js to bolster the claim that a trader's

‘overall profit factor can be improved by selecting high RS stocks [4] By using these measures such as RS and KPS, the trading systems presented in this book

‘can be used as a platform to build teller systems Make the systems your evi,

‘and you will have the confidence to trade ther

Afirst be ikea modest maiden, aude eneary villepon tis door;

Aferward be es swift a scurrying rabbit,

‘nthe enemy vibe too late to resstyou Sure, The An efter

‘Welcome to the highly evaved battlefield ofetectronic day trading, an arena li- {ered with the remains ofcompiters masquerading as sit machines with empty coin hoppers A confluence oftechnology and online trading created a network

‘of traders with aocess to real-time quotes, news, and instantaneous executions

As atide ofliquidity looded into the macket, the techaology stocks soared, and jus as quickly the tide weat out-along with the fortunes of many trades,

‘Avast count, Amazon.com had over one hundred books on day trading, but unfortunately nobody is let to read them The world probably dees not need nother Level II tutcral, but inthe interest of completeness, every toot has its place This chapter offers some traditional technical analysis techniques for day trang and presents some actual trading examples where tools sueh as Level Il

‘quotes have proven to be extremely usefil Before taking the first trade, follow these stops Most traders will fil, and this is not 2 "you too ean succeed in day trading” chapter

| Get the proper training from a professional mentor Learn from a trader, not 8 teacher

2 Choose ‘andthat a professional trading firm that invests in the latest technology has excellent customerservice

3 Read the tape und understand the intraday trading cycle Understand ‘the imptications oftrading the cpen and the close

A Trating isa business Caleutate your trading costs and set di weekly, and month goats based on a conservative rtum, rm

194 10 Day Trading

5 Invest in technical analysis software Automate the trading process as

much as possible

10.1 Finding a Day Trading Firm

Selecting the right trading firm is the second most important decision a trader

will make-the firm must demonstrate that it is interested in your success, not in

burning through your capital by encouraging excessive trading During the

evaluation period, you are assessing each firm's package of technology, training,

¢ Investment in software and hardware technology

¢ Training and mentoring

* Broad ECN access

° Commission rates and seat costs

¢ Technical analysis software

10.1 Finding a Day Trading Firm 195

Access to the best technology is essential for the day trader When evaluating a trading firm, evaluate the software features developed specifically for the day trader Most of the direct access brokers have Level II quotes, point-and-click execution, and rudimentary charting, but offer little else Advanced software has programmable features such as:

¢ Universal symbol filtering to eliminate unnecessary data

» Hot keys for fast execution (the mouse is too slow)

¢ Technical alerts such as three-day highs or volume spikes

* Real-time position, profit, and buying power information

customer service, and costs Make a checklist ofthe following items: Market | tin tion (level el

¢ Custom tickers with filtering by symbol and volume

* Quote lists with custom fields

¢ Access to all ECNs with advanced order entry (¢.g., reserve orders)

¢ Technical analysis software such as TradeStation or FirstAlert

¢ Customer service

¢ Technical support

*® NASD member and SIPC account insurance

When investigating a firm, find out what their traders are doing: day trading,

position trading, system trading, or a combination A day trader executes trades

that last from as little as a few seconds to as long as a few hours; the day trader

carries no overnight positions, 1.¢., is "all cash" at the end ofthe day, carrying no

exposure to overnight risk The swing trader, or position trader, executes trades

that usually last several days The swing trader uses short-term technical analy-

sis indicators to enter and exit positions Finally, the system trader uses computer

programs to generate automatic buy and sell signals with predefined entry and

exit prices, spanning all time frames

The second decision a trader must make is whether or not to trade on-site

or remotely The advantage of trading on a floor is that other traders can be a

source ofideas (just make sure they make money) The trading floors have dis-

tinct atmospheres; either the floor is noisy with traders exchanging ideas, or it 1s

quiet with concentration Question whether or not you will be able to tolerate a

trader looking over your shoulder and pestering you for ideas For some, the

banter is good; for others, it is irritating

When visiting a floor, go ten minutes before the market opens At 9:30 am

on a busy day, the software vendors send out a burst of market data, and some

brokers are ill equipped to distribute the data fast enough We have seen real-

time quotes that have been delayed by as much as ten seconds, an eternity in the

life of a day trader

¢ Bloomberg terminal

¢ Data feed services such as OpenBook™

Assess the number and quality ofthe technical support staff Ifthey spend their time rebooting the server during the trading day, then their technical support is inadequate Ifyou trade from home and they can tell you the frame relay delay in milliseconds over a DSL line, then they probably understand the technology Finally, corner one ofthe traders to ask about delays or outages

Service extends to other areas such as the back office, and a trader will want

to ask questions such as:

¢ How does the firm treat its clients?

¢ What is the trading atmosphere like?

¢ Who clears the broker's trades?

¢ How soon are trade confirmations recetved?

Finally, ask about the experience ofthe traders on the floor The truly successful day trader has been trading profitably for a minimum ofseveral years in all kinds

of markets Many firms are populated with part-time position traders who have other jobs There are many traders that come and go within several months

Although there is no substitute for learning how to trade other than from a seasoned professional, look for someone who 1s willing to teach you specific techmques In the following sections, we review the basic Level II trading tech- nique and then present some advanced trading techniques with a set of case studies

196 10 Day Trading

10.2 Trading the Nasdaq

The trading ofa Nasdaq stock is shaped by the following attributes:

¢ Number of market makers (depth)

ATAPI

A Ty *4 yy 4 £

° Average Vaily volume (ALY )

10.2 Trading the Nasdaq 197

When a market maker "makes a market", it is providing a dual function-it fills customer orders for that stock (agency trades), and it buys and sells for its own account (principal trades) Each market maker is assigned a four-letter code, a Market Participant ID (MPID) For example, the acronym GSCO represents Goldman Sachs, and MSCO is Morgan Stanley

The strongest market maker at any given time is known as the Ax The Ax is typically the company's lead underwriter and investment banker, but this role changes from day to day Other traders attempt to follow the Ax's lead by high-

e Float

¢ Average True Range (ATR)

¢ Spread

¢ Volatility Percentage (VP)

lighting certain market makers, but lack of access to order flow puts the trader

at a disadvantage Be skeptical ofanyone who claims to know how to follow the Ax; however, look for a public display of affection (PDA) on the Level II window,

Table 10.1 shows the relationship between the market maker coverage and the

spread As the number of market makers, ADV, and float decreases, the value

of the spread naturally increases The trader wants the combination of a tight

spread and volatility, using measures such as the VP and ADV/Float ratio For

example, trading 1000 shares of VRSN will average about $40 per round trp

in slippage (1000 X 2 X 02), reducing the trading cost substantially

Table 10.1 Nasdaq Trading Characteristics

Symbol Market ADV Float ATR &pread VP ADV

Makers (millions) (millions) Float CSCO 106 79.39 7180.0 0.80 O1 5.71 111

MSFT 88 27.42 4510.0 1.89 O1 3.63 0.61

VRSN 77 18.79 195.9 1.98 02 11.00 9.59

NVDA 68 9.72 108.4 2.82 06 8.06 8.97

MERQ 63 2.90 77.6 2.29 06 6.36 3.74

HOTT 42 0.39 30.2 0.92 10 4.00 1.29

PNRA 31 0.28 123 2.44 30 3.75 2.28

10.2.1 Nasdaq Market Participants

Each Nasdaq stock is represented by a group of market makers and electronic

ized exchange Investment banks such as Goldman Sachs, Merrill Lynch, and

Morgan Stanley are market makers Each market maker 1s an NASD member

i ATI MU cơI C ƠØ QUOL© d s urity; €2 NdIT Ke AKC display DO btd

and offer price quotations for a certain number of shares

a sudden jump onto the best bid or offer

The theory behind market maker analysis is that ifa key market maker goes high bid, then a buying situation is created, and ifthe market maker goes low offer, then a selling situation is created This is another myth perpetrated by the churners and burners The smart market maker is accumulating shares through

an ECN The perfect time to dump these shares is to pop up on the bid with a PDA and then be ready and waiting to sell to all comers on the offer through an ECN The difficulty of day trading with Level II quotes is that the risk/reward ratio is skewed, a pursuit similar to picking up dimes in front of bulldozers

The trader may feel that becoming wise to a market maker's movement is a ticket to profits Suppose in our previous example that the trader decides to fade

the PDA This time, the market maker really wants the shares, so the trader

goes short Guess what happens-the market maker buys all the shares because

he is filling an order, going high bid one distressing level after another Again, this is an issue oforder flow and the requirements ofthe market maker filling an order [17] A trader who sees a market maker as a conspirator should probably

be writing the screenplay for a sequel to /F'K

Electronic communications networks, or ECNs, are trading exchanges that are directly accessible to the public through various online brokers (hence the term direct access broker) The well-known day trading firms give access to all of the ECNs Note that each ECN is also assigned an MPID For example, the MPID ofIsland is ISLD, and the MPID of Instinet is INCA ECN symbols are listed along with the market maker symbols at the Nasdaq Trader Web site

The influx ofECNs changed the basic momentum game into a complicated puzzle ofanalyzing individual marketmaker movements Marketmakers devel- oped techniques for enticing day traders into buying stock that they wished to sell and vice versa Consequently, software developers added features to alert trailers to market maker movements, but the result was a Pyrrhic victory in the absence of any order flow When first introduced, Level II quotations gave the trader an advantage, now, they are js! a minimum requirement for day trading.

198 10Day Trading

1022 Level II Quotations

‘Together, the best bid price (highest) andthe best offer price (lowes!) comprise

Level J quote The current bid and ask price are displayed in combination as

‘he inside market The cdher bids atlower prices and other offers a higher prices

are outside the market, For example, ifa stock is queting 1738 X 1739, then

1738 isthe highest tid price and 1739 is the lowest offer price-cther bids start

at 1737 and lower, with other offers ut 17410 or higher The difference between

the best offer price and best bid price is known as the spread The spread on the

sample quote here is 1739 minus 1738 equals 001, or one cert ‘A Level display shows all ofthe bid and ask prices fora stack ie, sll of

the bid prices are in descending onder (from highest to lowest) on the left-hend

ide, and the ask prices are shown in ascending order (Jowest to highest) on the

right-hand side Each bid or offer price is associated with either a market maker

fr an ECN inthe first column ‘The number of shares that the market maker is

bidding or offering is shovn inthe third column in units of 100 Note how each,

price tier is delineated by coer

In the Level IT window in Figure 10, Goldman Sachs (GSCO) is bidding

1000 shares of Cisco at 1738, The Island ECN (ISLD) is bidding 2500 shares

al 1738, and instinet (INCA) is offering 2300 shares of Cisco at 17:39

Figure 10.1 Level Window

‘The Level Il window is modeted on the Nasdaq Workstation that each market

maker uses to display quotes, adjust quotes, nd enter orders, Software vendors

Implemented a facsimile ofthis display based on the Nasdaq data feed so that

‘online traders could see the same information

1023 Levelt Tuteriat

‘Before understanding the details of evel Il, one must appreciate the history of its usgge Originally, the Level I quote screen was the basis of a momentum technique known as "SOESing”, where a trader could profit simply by buying

‘ut all ofthe market makers athe bes offer price and then selting backto them

at ahigher price, based on the illusion of upside momentum However, market

‘makers earned the game quickly, and trading with Level II degenerated into @ game ofhead fakes, firepower, and spoofing!

gure 102 Level TI Stapshot 1 Figure 102 shows the first Leval I snapshot in the tutorial, The current quote for Cisco (Nasdaq’CSCO) is 1738 bid X 1739 offer-three market participants for a total of 4500 shares on the bid, and two market participants for a total of

3800 shetes at the offer The last trade was 1000 shares @ 17:38, andthe tock

is on a down bid (denoted ‘Suppose that after several minutes, the market maker window in Figure 102 by the | aow) changes to the display in Figure 10.3:

xô 10 Day Trading

Figure 103 Levelt Snapshot 2

Alldiough the Level I quote has remained the same (1738 x 1739), 2300 shares

of Cisco have been bought at 1738, and two ether market makers have joined

the best id A buying situation is created when the best bid tier expands, and

the best offer tier contracts Likewise, a selling situation is created when the best

‘offer tier expands, and the best bid ter confracts In this situation, momentum

traders will rush into Duy CSCO at 1739 since only one market maker remains,

hoping that Morgan Stanley (MSCO) will finish selling shares at 1739 and

tuise the offer to aptice of 1740 oc higher So, the momentum trader has bought shares at 1739 and is now waiting for

a higher offer Before continuing with our example, we esamine the practice of

Level I trading before decimatization (B.D.) and after đecimalizatien (A.D)

In 1995 B.D, a trader could SOES in for 1000 shares at 17 %4, and as soon 95

the offer was rised, try to sll it immedisely for 17 378 in order ‘quick $125 (not including commissions) In 2002 A.D, a stock such as Cisco to pocket 8

Jag a penay spread which invalidates the otiginal SOES strategy As a result,

some traders have adapted ty trading more size and staying inthe trade longer,

in contrast to the virtually rsk-fiee trade ofthe past ‘Several minutes later, CSCO is trading up to 1745 Now, the trader can act

a amarket maker and use any ofthe ECNs to sel 1000 shares ef CSCO at the

offer price of 17.45 For exanple, the trader may use ISLD to display its offer as

shown in Figure 104 Ifthe momentum continues, then the trader will sell the

shares and make six cents in several minutes For 1000 shaves, the profit will be

‘860 minus commissions

CSCO H4 10 |JMSCO 14 1g XID HO 72 |BID 1 as SCHE 174s ã |COWN Hấp l6 SBSH 4 10 |MUCO 147 q0 REDI 14 10 [SBSH 146 q6

COWN 12 10 |NEC 146 q0 MSCO 1 10 |@GSGO 1⁄46 1Ó

Time 104 Level I Snapshot 3

‘Suppose that the momentum stalls before the trader is able to sell the shares Further, the Level Il window shows that market makers are lowering their bids

‘andlor offers [momentum i reversing, then the trader should beable to sell at

‘he best bid price, in this ease ut 1744

1024 CaseStudy: ImConeSystems

“The case of mClone Systems(IMCL:Nasdaghis an example of combining news and tracking market maker movernent to predict price direction The company was expecting the FDA to approve its cancer drug Exbitux before the end ofal- cendar year 2001 The stock had been sliding from the seventies into the fifties near the end ofDecemier On the moming ofDecember 27, a Merrill Lynch

‘analyst issued the following comments regarding the drug's spproval Its “het uncommon” for companies lo be asked for more information about their drugs and the analyst said Erbitux sill appears to be headed for approval in the coming year "We beleve that over the nest six months ImClone wil have its fle activated and we expect the product to be approved in 2002"

+ 10DayTrding

Given that Menill Lynch is a tep market maker by volume in ImClene, the

logical step was to monitor the market maker MLCO on the Level IL window

‘Most direct access software lets the trader highlight market makers or ECNs in

the Level If window The trader can team much by observing the actions of a

Dighliglted ey market maker

Sự Tê TẠP ea is

Tignre10.5.ImCloneIntraday

‘AL approsimately 3:30 pm on the Friday aftemoon of December 28, Meri

Lynch went low offer on IMCL For the nest thirty minutes until the closing

bell, MLCO remained on the best offer AS ECNs rushed to step in frent of

MLCO to sel shaves, the market maker aggressively lowered ils offer price to

sell stock The price plummeted several points over the last thee bars, as shown,

in Figure 105,

‘Then, with the whir of fax machine in ImClone's offices on Dee 28, the

TDAS leter anived, rejecting the ballyhooed Erbitux trial and casing

doubt over the drug’ future Wall SreetJournal, February 7, 2002

‘Ac7:14 pm that evening, ImClone announced that the FDA had decided net to

accept the filing forthe Erbitux application On Monday morning, January 31,

IMCL opened at 4539, down 986 points from Frey's closing price (refer to

Figure 106) An investor may have been inclined to listen to the analyst's posi

tive comments for guidance and buy the stock but the astute traderlets price do the taking and typically does the opposite oft investor

Figure 104 ImCloneDally AAs shown in the ImClone example, Level IL trading is not about plopping in front ofthe sercen and hitting hot keys, Use the technology and combine it with market knowledge to esplil unique trading opportunities Further, use other

‘data sources to refine your understanding of any given stock and understand its pattern oftrading

‘The Nasdaq Market Data Web site offers detailed data reposts such as the

‘Market Maker Price Movement Report and the Time and Sales Repott these are daily replays of Level I price movements and trade history, respectively (Order a few ofthese reports and track a stocks price movement throughout the centre trading dy

1025 Case Suly: Comverse Techreogy

‘The following example Mustrates the power oftape reading-no multi-colored screens oF multiple time frame charting We think a trader just starting out should sit dovn in frout of the television, tune inte CNBC, and then hit the mute button For the next few days, the trader should just read the tape, watch nthe ticker serall across the bottom of the screen

208 10DayTrading

‘As the symbols pass by, certain pattems begin to emerge Focus on the ras in

ten thousand share blocks and higher, eg., 10K 20K, SOK ete Then note

whether the trades are printed in green (up ticks) or red (down ticks) The usual,

large-cap suspects will appear cn the tape Newsworthy ‘well, but we wat to foc on Hove stocks with no apparent news, so review the stocks will appear

rmoming news to eliminate the known ones This skill becomes second ae

‘with experience Gnluly 9 and July 108, 2001, several casual glaces a the ticker revealed

some unusual activity in Comvene Techaology Large bloc of CMVT were

crossing the tape, anid no news had been released about the company All ofthe

trades were at Kast 10000 shares in size, and all ofthe trades were cecturing

con down teks

Figure 10.7 Converse Technology

“OIhly 10°, Comverse announced that they were citing earings estimates for

the next two years The stock gapped down ever twalve points that morning

(Figure 10.71 In retrospect, one Wenders whether oF not anyone Kew abent

hese ents aead ofthe announcement (ongue planted firmly in cheek) One

‘month ate, investment houses uperaded the toc (tongue deeply embedded) In the following sections, we show the trader hov to analyze socks based

on their Mock volume, and explore how to detec unusual trading volume in

small-cap stocks As with our tnding systems, we Want to analyze the market from as many perspectives as possible

1026 Case Study: OSCA Ine

In easly 2002, OSCA had an average dily volume of 85000 shares Then, on

Febmary 19°, the average daily volume was exceeded at 9:55 am, in the absence

fofnens After spiking up to 22, the stock pulled back to 20 and then slowly

‘gained ground for the rest of te day on heavy volume A230 pm, the price spiked back to 2% where it closed on the day (Figure 16)

‘The various news organizations had picked up stories ofecquisition rumors tuoughout the afternoon, but an average volume filter detected this unusual

‘movement ealy in the morning The formulas easy: calculate he average daily

‘Volume ofthe stock forthe past twenty days; we want to focus on illiquid stocks with average daly volumes ofbetween fifty to two hundred thousand shares

‘Then, compare the volume ofthe current trading day to the highest volume of the past sity days to see ifvolume is tracking higher

2s Ciao Bist e203 Sean “Veto

Figure 108 OSCA Ine

vamp 1 ican example of FintAlrt fier fer detecting unusual vetnein slov-capitalization stoc

Example 10.1 Uoossal Volume Filter

181 Volune > (VoIHighéo a 1)

42 Volume > 30000)

11 Vola + hao

206 10Day Trading

103 Day Trading Techniques

ay trading is simply the application of technical analysis to smaller time

frame To illustrate this point, consider the Money Flow Indes, or MEL The

MFI formula uses the high low close, and volume of bar to calculate a value known as Money Flow, or MF Ifthe MF ofthe current bas 18 grester than the

MF ofthe previous lar, then money is flowing into the stock: a declining MF

implies that money is flowing out ofthe stock, Without getting into the details

‘ofthe calculation, cleaty the MFI can be calculsted on any kind oftardaily or

intraday Figme 109 shows a divergence on a daily chart of Ciena,

moh ut! i th ntl!

igure 109, Dally Money Flow

(On the intraday chart shown tn Figure 10.10, Ciena gapped up on the morning,

‘of November 13°, cresting a divergence between its price and the MFI The de- lining MFI from the previous day was a signal to sel short Ciena on the open

Her, the strtegy for the trader is to locate stocks gapping in either direction

before the opening bell and filter them with the MEI from the previous day 10

identify divergence patterns “The chief objective is to combine the tools provided by the direct access

software (eg, gap scanning) with traditional technical analysis to identify high

probability price patterns Direct sceess software makers are just beginning to

‘add other filters and built-in scans to complement their charting features,

ail ly a =

| tO a

|

a ae ia kei — ee

—

‘As discussed “Sneecssful day trading requires mastery ofthe gap and while gaps ean result in in Chapter 2, gaps axe ential to stntegies such 8 pair trading fast profits ey are the source of major trading mistakes The first mistake is the bargain complex discussed in Chapter 6 Just a investors are attracted to fal- ling prices, traders are attracted to stocks that gup down A key to trading down

‘zaps isto distinguish between stocks that are gapping because ofnews affecting,

‘the whole market or because of news abut the eompany itself

‘The ether ey to trading gaps is to wait for confirmation The temptation is

‘always there fo scoop up a stoek before the market opens because the price ap- pears cheap Ifthe stock has bad mews and is chesp at 830 am, then it will

‘probably be cheaper st 9:30, Writ nail the last possible minute vo assess the di- rection ofthe stock before the market opens

‘Remember that the gap price reflects al ofthe known information about the stock, The point i8 not to dwell on the fact that the price was 58 yesterday and

‘now35, The trader wants to wat for ethers to commit themselves and then take

‘a trade in whichever direction price leads him orher Let the stock establish its range and then Wait fer any breakout This technique is known as an opening range breckout (6,