Strategy Description: This is actually a really really basic play, but for some reason I missed it so I wanted to document it and go over the pattern again. I think maybe I'm used to the late day version of this pattern.
Basically looking for a stock that has moved a long way, and you are looking for a short opportunity. On the given day the stock will trade higher on the open, with some form of opening drive, but then begin to establish a series of lower highs, while holding a very clear base.
As time goes on ideally this base becomes quite close to vwap in order to signal a momentum shift on the break, however it isn't necessary.
Then going into the break the stock will get tighter and tighter into the break, allowing for an enormous RR entry with a tight stop.
Ultimately you are going for a g/r move, and some form of associated washout.
Add on the successful g/r move, but be careful not to get faked out, i.e. first move is likely unsuccessful.
Cover along the way locking in some gains.
Bigger Picture: In this case MU is a market stock, and the market did play a role in the rollover being so clean. However, the market was flat until 12:30 when it sold off, and in this case that was when MU had it's washout (but not first move).
Intraday Fundamentals: ATR=$1.16, FS=9%, ADV=22m, Rvol=1.3x, Market Cap=$33.5b.
MU reported a supply agreement yesterday which was the cause of the uptrend yesterday.
Technical Analysis: $31.13 was a key breakout level on the daily, so when MU starting holding below that it was also confirmation.
Aside from that it is all explained in the strategy description.
Reading the Tape: The first notice of weakness was that washout of the symmetrical triangle. It bidded back, but it never really regained any solid strength, getting to the washout lows again. I wasn't watching the crack, but you would see price compressing and the offer just not lifting, then on the crack it would wash through, rebound but get pounded back down with the offer not lifting again.
Trade Management: Initiate the short on the crack, or possibly a little before the crack anticipating it (depending on how clean the tape is), adding on the retest of the breakdown zone. Cover some into the g/r zone, then as it goes over/under g/r add it add. As the trendline establishes signficance add again with tight stop, then begin covering into the washout.
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