Mid-day fade trades Part I

Today I tested 2 what I call "mid-day fade trade". The current "mid-day fade trade" criteria (constantly refining) are:

Trade type: Intraday scalp

Thesis:

1. stocks get push into resistance early in the session has a lower probability to break out in the mid-day slow choppy trading environment
2. some stocks can be faded at resistance level when buyer failed to lift stock above important resistance level
3. looking to profit from trapped momentum-based bulls losing patience and exiting their positions

Setup:

1. stock must make a sizable non-news driven rally from the open and run into resistance in a 30min/ daily time frame
2. Time of day - rally into 10:30am to 1:30pm
3. Non-trending day - market did not just take out major level, prefer emotional larger candles in the indices on the intraday 5min charts, tick and a/d are mixed
4. looking for 3-push patterns with declining volume and increased frequency (stock needs to breathe more frequently)

Entry/ Stop/ Target:

1. enter on 2B reversals/ failed breakout from resistance levels on 5 min charts
2. price stop: above high of day
3. time stop: 3pm if its not working
4. target - vwap (1st target)/ opening price/ prior intraday support
5. risk/reward is >2x

Other thoughts:
- prefer stock in downtrend on daily chart


Trade 1: NUE - 8/12/2010

- 30min chart showing 38.75 as resistance


- 5min chart showing 3-push pattern, breaking intraday uptrend line mid-day
- stock moved quickly to test vwap and prior support


comments: need to add as trendline is broken

Part II will cover a failed mid-day fade trade that gave important information on the stock I was trading.