Setups

Here's a couple examples of setups.  First, the slingshot.

Then the fishhook, great for earnings plays.

The fishhook can be used with a 1/2 or hour slingshot as a trigger for an earlier entry.  The shorter the timeframe the more false positives there will be.

Fishhook Update

After studying my Fishhook trades over the past year. I've made a few tweaks.


1-2-3 Go!

I've learned that buying before a 2 day rest is dangerous.  It is chasing a stock that have already run.  We want safer entries into extreme momentum stocks.   On REPH, I executed the 1-2-3- go rule perfectly this past week as it made a 40% 2 day burst.

UPDATE:
In the previous chart, I said this was ready to go..  3 days later it hit $9.93 for a 15% move.

This was a lesson I've learned the hard way.

CAPN.  I could see the Fishhook forming but I jumped it:

Had I waited for the 1, 2, 3, go, I would have gotten the buy signal the next day and a 35% 2 day move:

If a breakout before day 3 it is  not Fishhook.  Buying a day 1 or day 2 is buying a continuation pop on an extended stock:

IPOS:

Aftermath:
Although the initial gap faded, the next day--the  1,2,3 go day-- pushed higher.  Admittedly this would be a more difficult breakout to buy  than a breakout from linear action such as reph, but it nonetheless could be bought with a stop at the gap.

I personally think that it would be easier to buy off the next breakout as FRSH now has nice tight consolidation.  A range expansion breakout next over $18.30 would present an ideal entry:

Risk Management:  Fishhooks on a daily timeframe are short term trades.  They should last 2-4 and hold the breakout.

Hold the Breakout --- preserve capital.
A good move should hold the breakout at a minimum.  I got a Fishhook signal in LBIO yesterday.  I took it, buying the breakout at 13.80:

Be wary of Gaps:

Most investors talk about gap ups as if it is a positive.  I hate them.  As gaps often put in a ceiling.  Today,  LBIO Gapped to $15.  That sounded alarm bells for me.  Often the Gap signals a reversal in the works. If a fishhook gaps... do not let it go negative.  On this one I raised my stop to $14.35.  So I made $.55 on this failed fishhook.  I should have raised to yesterday's close but still not a bad result for a failed breakout.

Safety Nets:
I've had a number of Fishhooks do remarkably well and others make me look foolish.  I've since studied why some work and other don't.  I've since determined that RSI works very well as a filter.

Here's one that failed.  I bought Day 2,

Buying early was  my first mistake but the second mistake was that this stock had a very poor relative strength on a weekly:

Another Fishhook fail:  Note that the Weekly RSI was not over 70.

But a fishhook Win:

The weekly RSI  and MCAD at the time were the highest for the year.

TIME FRAME

Its important to know what time frame the breakout is occurring.  On REPH the daily is setup for a fishhook as described above, but on the weekly its extended. As a result, taking a fishhook on a daily, requires the exit to be taken on a daily frame.

A stock that is setup  for a fishhook on a weekly may be held for a longer period when the breakout occurs. PFNX looks like it is setup three narrow range days.  Any breakout above 15 can be bought:
  PFNX. 

Aftermath:  Boom! run to $19.

Conclusion:

• A fishhook Must rest at least 2 days.  Remember 1, 2, 3, GO!
• A good fishhook holds the breakout.  Take the breakout preserve capital by moving stops to breaking point.
• continuation gaps are yellow flags.  Any Gap requires moving stop to prior day close.
• Use the RSI and MACD for the time frame above what you are trading. If these are not setting new highs. DO NOT TAKE THE TRADE!

Stocks have Personality-- Learn Them and profit

One of the best things about creating a trading journal is that it becomes your very own encyclopedia.  Before I enter a new position I look to see how a particular stock has traded before during a similar move.  If I've traded it before even better.  

One recent example is HPJ.

I know that a number of traders rushed in on the gap move only to see an ugly fade. 

 I waited on the side lines and reviewed my trade journal. Last year I saw a similar high volume gap which faded initially.  

There are a lot of similarities between the two moves.  Last August, I bought HPJ as it fishhooked around the bottom. 

I was rewarded with a 3 day 30% move.  I sold this gap at $6.90 in pre-market.

In any event, last August's move in HPJ was my template for it this time around.  If it rallied off the gap, I planned to buy.  On February 10, HPJ sells all the way down to $5.00 and then reverses. I bought at $5.40

So far ... So good

HPJ is now up to $5.71.   This stocks ability to Fishhook after the 1st day fade tells us there is something more to this move.  Had I rushed in I would have been stopped out and would have missed this move.  But knowing that HPJ has a tendency to fade the first day move and then push higher allowed me to be in this trade. Now I don't expect the 30% move I received last time.  But who knows.

Fishhook Update

 I've had a lot of questions about how I find big gain stocks and trade them with the Fishhook setup.  This post is a follow up on my initial description of this set up

The Fishhook Setup that I described has been performing extremely well.  It has performed much better than the range expansion breakout that I also trade--which has had limited follow through the past few weeks.