Breakout Setup for Friday’s DLR Stock

During the first hour of the US trading session, DLR stock provided a breakout setup in the 1-minute chart. The stock’s price moved from $48.50 to $47.50 in no more than 5 minutes, that would have meant $1,000 profit if you day traded the stock with 1,000 shares. Since the Digital Realty Trust’s stock had been quite volatile at that moment and the ATR was quite high, I opted to trade with 500 shares, to avoid setting a tight stop loss which would have been hit before price’s movement speeded up. The difficult part of the trade was the exit point, as the stock’s pullback was also quite fast.

The DLR stock opened lower on Friday with a gap and breaking the support level according to the daily chart. I was expecting a favorable candlestick formation in the 1-min chart, as I prefer trading intraday and focusing into the smaller time frames. The DLR stock was certainly in my US trading watch list, when the candlesticks continuously peaked lower and bouncing off the support level at $48.60. Waiting for the imminent breakout had me watch closely the Interactive Brokers Booktrader, where market depth would help me foresee if the support level was to be broken. When buying orders started disappearing, it was a matter of seconds before the stock price collapsed. Fortunately I was quick enough to short sell at $48.56.

The stock price went on and verified the resistance level at $48.60 right before the breakout developed into a fast decline. The tricky part was to understand when the short term downtrend would retrace. The big red candlestick accompanied by huge volume peak was just the indicator of a pullback. I decided at that moment that I should close my position, but the fact was the buyers took control of the market in an instant. I was literally entered orders continuously during the following minute – inside that long green candlestick – trying to catch up and buy to cover. Thankfully I was just able to hit $47.77 starting from $47.50!

The DLR stock continued to retrace up to the resistance level and I did another trade downwards at that point for a couple more cents. However the point of this post was to show the great trading opportunities day trading offers in a matter of minutes. One of the most effective intraday trading strategies is to point out possible breakouts and trade the minute the prices break out, setting a stop loss either at the last candlestick’s high, or a little above the broken support/resistance level or at the latest peak. Depending on that stop loss, we should calculate our risk and trade the number of shares according to proper capital management.