"Jens, the coaching humbled me, because I have been working in the industry a long time. Being with you was the first time that I really got to hear 'first hand' how day traders think. I've found there are many misconceptions that I built up over the years that I must now change
— or I won’t be successful. Thank you for everything."
Step 1 - Look for a BEARISH HARAMI against MINOR PRICE RESISTANCE, and/or against a declining Major Moving Average (10 MA, 20 MA, or 50 MA) on the daily chart.
Step 2 - Pull up a 15 min. chart of the stock.
Step 3 - Note the low price of the previous day's daily HARAMI candlestick. Your entry point is 1/8th below this price.
Step 4 - On the following day, allow the stock to trade for 5 minutes before entering. Sell short the stock only if it breaks below the entry criteria (1/8th below the previous day's low) and only after it has traded for 5 minutes. If the stock does not break below the entry point, do not enter.
Step 5 - Place the initial protective stop 1/8th above the high of the previous day's HARAMI candlestick. Cover the stock for a small loss immediately if the stock breaks above this price.
Step 6 - Monitor the stock as it continues to decline downward. Look for areas of resistance (either minor price resistance or base price resistance) on the 15 minute chart, and re-adjust your protective stop price downward as the stock continues to decline. This will protect your profits, and/or minimize your losses if the stock should turn against you.
Step 7 - Monitor the stock on a 15 min. chart as it declines downward, and stay in as long as the protective stop is not violated. Allow the stock to achieve 1 point or greater profit, and then look for signs of strength. A reversal candlestick pattern on the 15 minute chart will serve as a good indicator for a reversal point. After the price reaches an area of support and strength, cover half of your position. This may occur on the same day of entry, or on the following day, depending on the weakness of the stock. Maintain the latest protective stop price for the remaining half of your position.
Step 8 - Allow stock to continue it's decline. After the stock has declined further, again look for an area of support where the stock begins to strengthen and reverse. This could be a DOJI candlestick, or any other reversal candlestick pattern on the 15 min. chart. Cover the remainder of the position for profit.
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Sunset Capital Management Ann Arbor, Michigan