Invest and Trade Profitably with Jon Johnson

As per any entry you list volume and price requirements. What happens if price hits but volume doesn’t? Or what happens if doing put and price hits in morning and keeps heading lower buy volume hits at end of day and I have missed the move down during the day?

August 30, 2000

First off, your questions make perfect sense. While we always love an ideal entry with the volume and price targets matching up, that is rarely the case. So what are we left with? Making the best of what we get. This is especially true considering the market we are dealing with right now. Gone (at least for now) are the old days where we waited for ideal technical patterns and then bought on the breakout for huge moves higher; we now look at stocks banging around in a range, setting up anything decent over support or under resistance, and with enough room to a prior high or low to make money. A breakout or complete breakdown is a bonus now. This does mean we look at smaller moves, and thus we aren’t quite as picky with volume hitting our target with the price hitting our entry target. We need to get into a play with enough room to make money and keep our risk/reward up to snuff. This is okay, however, because we AREN’T looking for that breakout move. Often we are now simply making a trade up to resistance where we think the stock will fall right back down. The right volume is just a bonus (though anything too low will give us pause). We can make money on the way up and then put that same money to work on the way down. That is why we are doing very well with our plays right now despite very few true ‘breakouts’.

When looking at the volume target you also need to keep in mind whether it is going to be a morning or afternoon buy. Most trade happens in the first and last hours; sometimes it is front loaded and sometimes it is backloaded. If a stock started solidly the day before in the right direction and hit our entry too late to buy, or if we just wanted confirmation the next day, we buy with a continued move in the same direction early the next morning (barring a complete reversal). With a morning buy we often won’t get the ‘target’ volume, but as long as volume was decent the prior day that is fine. With an afternoon buy we are more likely to hit that target volume and will buy if a move holds into the close. If it is not quite there though, we aren’t going to sweat it. Again, volume is still important, but unless volume is drastically below average we are still comfortable buying with just the entry price hit as we are making trades, not playing breakouts. Just remember all the plays we provide give a great risk/reward (according to our target and stop points), solid set ups, and are stocks we are comfortable putting our own money in. If the volume is too low and makes you pause that is okay; you need to be confident in your trades to keep emotion out of it. Just play by the rules (good entries, watch your stops when necessary, etc) and you will start to build your comfort level as you make money along the way.

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