Every morning active traders must go to work to discover the stocks that are moving and find optimal set ups that offer good risk:reward. Since the mornings are when we have the most mental energy (given we choose a proper morning routine), and the market open is the most profitable times to be in and out of plays, traders must be especially focused during the market open and try to stay active throughout the first hour of trading.
Last week I used my market tools and filters to find stocks that were moving and could potentially offer good risk:reward opportunities. ANF popped up on the radar and I immediately began watching the tape and identified major weakness in the stock just after the open at about 9:45am. I decided to keep with the stock and stayed vigilant and noticed ANF had a nice Breakout trade setting up after it retraced to the 38.2% momentum based fib level (see chart). Now I had a stock that is moving with good momentum and a valid trade setup to get short. In addition, there was confirmation on the tape that the stock was weak. Those three occurrences usually lead to a profitable trade and with other points in my favor it was time to size up and execute this set up with a large order.
My sell stop was set two cents below the impulse leg at 57.49 and my order got filled immediately after the break of 57.51. My first target was hit at 57.09 and I was able to take the risk off of the trade there. The second target was met at 56.54. This was the 161.8% fib extension of the impulse move. The rest of the position was closed there catching almost a point in the entire trade. Below is a graphic illustration of the Breakout trade in ANF last Tuesday.