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My trades have a median duration of probably 2 hours, and normally range from a few minutes to 4-5 days. However, I’m currently looking at a potential setup on a weekly chart. Sirius really caught my eye about a week and a half ago, and I’ve been keeping tabs on it since.

First, the daily chart:

Notice leading up to point (1), we had a high-volume spinning top on the 14th, then decreasing range and volume down to the nr7, low-volume dummy spot on the 16th. Hard to trade the gap-and-run that ensued, but the action on the 17th and 20th were enough to get lots of folks’ attention (including mine). It’s a long time since Sirius moved 75 cents in two days.

Next, see point (2), the sideways price movement on beautifully dwindling volume since the high-volume top on the 20th. This is very clearly a sideways range between about $4.75 and $5.30, so the narrow bars within it are not dummy spots.

Anytime I see interesting action (such as the above), I scroll through multiple time frames to check for a tradable pattern.

Remember, I’m talking about tradable patterns for me. You may see something I don’t and make money in a completely different way on the same stock. To-MAY-to, to-MAH-to, or maybe just ‘maters.

I think the current weekly chart is definitely worth a look:

The most recent week’s bar is an nr7, has the lowest volume in months, and comes two weeks after a high-volume hammer which could serve as a near-term bottom. Both of the bars since the hammer have closed above the 10-day and 20-day moving averages, again something that hasn’t happened in months.

It’s certainly too early to pronounce this a trend reversal, but it’s still a good enough setup for me to try a trade. Here’s what I’ll be watching for:

• First, a break of the 5.29 high set the week ending 3/24. I’ll be watching for the NDX to be breaking 1720 and the S&P to be breaking 1310 around the same time as confirmation that the market is pointed in the right direction.(Note: As of this writing, NDX is 1704 and S&P is 1295). If so, I’ll get long here.

• If the planets line up and I’m able to get long, I’ll set a stop at 4.90, which is at the bottom of the 3/31 nr7 weekly bar and also happens to be right at the top of the 3/17 hammer. That’ll give me a total risk of 0.39, which also tells me my position size. If, for example, I wanted to risk $100 on this trade, I’d need to buy 100/0.39, or about 250 shares.

• If I do get in a favorable position (i.e. don’t get stopped out right away), I’ll start trailing my stop almost immediately.

  The Dave Landry method would be to sell half my position and move my stop to break-even as soon as my initial risk of 0.39 was covered, which would be at a price of (5.29+0.39), or about 5.68. I say “about” because I’d have no problem dropping it a few pennies if the market started failing, for instance.

  However, I don’t know if I’d use the Landry method on this one. How well it works varies with the time frame. It’s great on trades taken off of daily bars, not as well on some intraday ones. I’ve never used it on a weekly-bar trade, mainly because I can’t remember taking one.

  I’d probably just trail my stop using a variation on the PSAR (parabolic stop-and-reverse), or as I use it, just a PS — I don’t reverse. Also I don’t use the “usual” formula for the PSAR. I use more rapidly accelerating factors to get the stop moving sooner. I’m willing to risk getting stopped out early to avoid letting a running stock get too far ahead of me.

So, there’s that. Let’s see if anything materializes from this thing, or if it’s a fakeout. Cheers.

Denny: Alan, Bev is the woman I’ve always dreamed of. An angel in the bedroom, and a whore in the kitchen.

Alan: I think it’s the other way around.

Denny (smiling): Not last night…

from Boston Legal