When we use a strategy based approach for entries and exits, we achieve a higher level of consistency. My “workflow” and supporting thoughts follow in this brief summary. We cover rules that need to “fire” in order to trigger a new entry, when you consider a candidate from the watch list. My comments are in the sidebar of the watch list, along with, targets, measured moves (MM), stops, support, resistance and earnings dates.
MRCY – Mercury Systems, Inc. provides secure processing subsystems for various critical defense and intelligence programs in the United States. The companys products and solutions are deployed in approximately 300 programs with 25 defense prime contractors.
We’ve traded MRCY recently. We are looking for a follow through, from Friday’s bounce. MACD STO and RSI are not in an optimal state, however we can look at a possible entry at or near Friday’s closing prices if the 5 and 15 minute charts setup. We will look at those time frames and consider an entry.
If MRCY were to open and trigger similar to what we see at point “A”, we would consider taking 1/4 position and wait for a flag. In a perfect world, MRCY will flag again today after the opening bell, then begin pushing higher, similar to what we see at point “B”. If that happens, a follow through bullish Marubozu candle or an equivalent is what we anticipate to trigger adding another 1/4.
If all we want to do is scalp, we will ride our position until we see price close below the 9/20ema, reference point “C”. If this is a swing trade, we would hold at 1/2 position.
Since MRCY closed near the high of the day we would likely swing, had this been our initial entry. Use this simple workflow, including observations, strategy and rules on your next position.
ESNT – Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. The company also provides information technology maintenance and development services; customer support-related services; and contract underwriting services. It serves originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders.
ESNT caught our attention. The last three trading sessions show buyers. How do we know? We know by the presence of wicks at the lows of the day, Wednesday, Thursday and Friday. RSI is not in the optimal state, however, if we see buyers continue this morning, we are likely to see a bullish candle. A push back above the 9/20ema on increasing volume would denote institutional footprints. Should these observations appear, price and momentum will produce a turn in RSI. A follow through on this indicator, that pushes through 50 and continues rising is what we are looking for. This is a pullback to breakout pattern (PBBO).
Using the method outlined in the MRCY example, we will watch for developments in ESNT, that mirror point “A” in the MRCY 5 minute chart. We note ESNT is changing trend, as price emerged above the 9/20ema and the short moving average (9e) is above the intermediate term moving average (20e). RSI is rising and volume was significant at the close. MACD and STO should continue to incline for this trade to complete its anticipated setup. Watch for 1) a large body bullish candle (MRCY point “A”) followed by a flag or two. (MRCY point “B”)
Here is the watch list. We suggest printing a hard copy and have it ready. Mark up some charts in this fashion presented above.
Happy Monday
Vinny
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