Tape Reading With Hit and Run Trading: Spotting Explosive Moves Before They Happen

Whether you are a day trader, a swing trader or a longer term position player, your entry sets up the success of the trade…or not.

Whatever time frame you’re trading on, the entry is critical because if you chase indiscriminately  and buy too high, you stop is liable to get hit in a pullback.

Likewise if you enter a  pullback incorrectly,  be it intraday or on the dailies, timing is critical because the risk is you may be buying too early in a pullback or after an buying climax precipitates a deep downdraft.

There are three criteria Hit and Run uses to identify long and short entries:

1)      Pattern. We have a time-tested  (30 years) proven arsenal of pattern setups.

2)      We combine these setups with “square-outs” or Time and Price synchronicities. Below we will walk through several current examples.

3)      Tape Reading. Speculation is observation. We have a core universe of stocks that we watch during the market in order to get a “feel” for their personality and whether they are under accumulation or distribution. Intraday relative strength (or weakness) and day over day relative strength (or weakness) often telegraphs explosive moves before they happen.

Let’s take a look at a couple of examples.

FTAI Long

On Wednesday May 1, the Hit and Run Private Twitter Feed alerted members to take a long swing in FTAI getting filled at 73.65.

a) Going into the bell last Wednesday, May 1, FTAI was leaving a large range outside up day (LROD).

b) It was putting in a 180 buy signal. On Tuesday FTAI closed near session lows: on Wednesday it was closing near session highs: a “180”

c) FTAI was set to challenge the April 26 Key Reversal Sell Day. Offsetting the April 26 high would trigger a Keyser Reversal of a Reversal continuation buy signal. Fast moves come from false moves.

d) Most importantly FTAI was showing superior relative strength on Thursday in the face of the broad market getting hit. It was Torpedo, “damn the torpedo’s full steam ahead.

Note how the SPX was under selling pressure on May 1^st while FTAI caught a bid.

On Monday, as FTAI attacked 82, Hit and Run rang the cash register on the final piece on Monday for a 6.85 gain.

Why did we sell? The Square of 9 below shows that 82 is 180 degrees straight across and opposite the recent swing low at 66.

CVNA Short

On Friday, on the private twitter feed we flagged a potential square-out in CVNA at 125.

This is because 125 “cubes-out” from its 67.50 low.

In other words 125 is 540 degrees in price up from the April 22 low of 67.50.

CVNA spiked thru 125 on Monday to 129  but reversed leaving a Combo sell signal---a Lizard Sell (a new 10 day high Topping Tail and a Gilligan Sell (a gap up to a new 60 day high with a close at/near session lows).

However, CVNA began to reverse.

The move above 125 was a “Pinocchio”…at least in the short term.

Once 125 was lost selling accelerated.

Downside follow thru projects 90 degrees down from 129 to 118.

Breakage below 118 opens the door to 1098, the next decrement of 90 degrees down.

AMD Long

Monday morning we followed up on Friday’s alert on AMD’s Lizard buy signal and Soup Nazi buy signal traced out on Thursday.

AMD struck 156.65 and its 20 day moving average on Monday.

Clearing 157 opens the door to 165.

The presumption is AMD will respect 157 and the 20 day moving average with a pullback.

The nature of that pullback and the market will telegraph whether AMD sets up for a drive to 165.

In sum, three factors drive winning trades at Hit and Run:

1. Pattern/setups
2. Time and Price square-outs or balance points
3. Relative strength

When these three elements come together, the odds of a winner are stacked in your favor.