Day Trading

Our day trading strategy is centered on the combination of the swing trading approach mentioned above and technical indicators intra-day, namely pivot point and EMAs. Something we like to call squeeze up or squeeze down.

To best understand the strategy, let's see the charts.

Squeeze UP is a LONG set-up

Example 1 - TSLA

The stock rallies from open to the alert/R1 zone and then starts to pause. The price range is contained within the alert zone and the ascending EMA (9EMA in red and 20 EMA in yellow, we will come back to which one to look for later). Note as time passes, the price range is narrowing as it waits for EMA to catch up with R1. The stock is free to breakout one the EMA catches up. Stop is under EMA/R1.

The same pattern is shown here in 15 min chart. Note how 'cleaner' the pattern is when you zoom out of the 5 min chart.

Example 2 - BABA

The stock open at the alert/R1 zone and then starts to pause. The price range is contained within the alert zone and the ascending EMA (9EMA in purpel and 20 EMA in yellow). Note as time passes, the price range is narrowing as it waits for EMA to catch up with R1. The stock is free to breakout one the EMA catches up. Stop is under EMA/R1. 5 mins chart.

The same pattern is shown here on the 15 mins chart and once again, see how cleaner it looks.

Example 3 - PLTR

The stock opens below the EMAs but quickly climbed above and hit the alert/R1 zone. The price then starts to pullback to the ascending EMA before being squeezed up above the alert/R1 zone at around 11am. Note how another squeeze up occured shortly after against the R2 zone. Hit, pause, and break, while the price range is contained within the alert zones. Stop is EMA/R1 or R2 depending on your entry price. 5 mins chart.

The same pattern is shown in 15 mins chart and again, see how much cleaner it looks on a longer time chart.

Example 4 - MSFT

Our reader should be able to read this chart now. Similar to the above, the stock rallies from open to the alert/R1 zone and then starts to pause. EMAs started to flatten until upward trajectory is restored again just before 11am. The price revisits the alert/R1 zone and breakout once the EMAs catch up. Stop is under EMA/R1. 5 mins chart.

15 mins chart

Example 5 - QQQ

Identical to individual stock, ETFs also have similar price pattern as shown by one of the largest ETFs out there. 5 mins chart.

15 mins chart.

Squeeze DOWN is a SHORT set-up

Example 1 - SNOW

Stock opens below EMAs. It makes an attempt to break above but fails and grinds lower. The alert zone is S1 and once the EMAs catch up, the stock is pushed below S1 by the descending EMAs to S2. Note the price actions are all over the place after reaching S2 on the 5 mins chart, but much cleaner again on the 15 min chart below.

15 mins chart.

Example 2 - CRM

Stock opens below EMAs and grinds lower. The price is pushed down to the first support zone at S1, without any bounce, and to S2. After bouncing off S2 and rejected at S1 and by the descending EMAs, the stock is pushed down once again to S2 and this usually is a strong sell signal. The price falls below S2 shortly after.

15 mins chart.

Example 3 - AAPL

Note in this case, there are no bounces at either S1 or S2. 5 mins chart.

Even cleaner on the 15 mins.

Example 4 - TSLA

5 mins chart.

15 mins chart.

Example 5 - QQQ

Identical to individual stock, ETFs also have similar price pattern as shown by one of the largest ETFs out there. 5 mins chart.

Intra-day Reversal

Lastly, lets see this intraday price action on BMY where we have squeeze down, support bounce and squeeze up all happen on the same day. An intraday reversal! 5 mins chart.

15 mins chart.

Summary:

  1. Organize your watchlist, having a pre-determined list (from our daily newsletter) to help you focus on charts you already know to increase success and reduce mistake.

  2. EMA is a powerful tool and knowing how to use it is instrumental to decision making. The most important ones are 5 min 15 min and 60 min(hourly) charts and their respective 9 and 20 EMAs. We like to use 1 min and 5 min charts during the start of the trading, and gradually move onto 10 min and 15 min in the afternoon for a cleaner indication.

  3. Buy breakouts, pull-backs to EMA on trend days up. Short breakdowns on daily, rallies to intraday EMA on trend days down. Range bound days: buy pull-backs to daily support and short daily resistance.

  4. Key matrix to tell direction of trend? Breadth (all the leading sectors up or down in the same direction?), EMA (is every dip being bought or every rally being sold?) and support/resistance(hold or not hold).

  5. For squeeze down, the first hit to support will usually get bought but the second time around is usually a signal to sell.

  6. Don't chase gap up or down, wait for pull-backs and re-tests. Panic/spontaneous trades based on fears of missing out have very low success rates and high chances of losing.