Does technical analysis work in day trading? Buying at the support level of a trending channel and selling at the resistance one sounds like a plan and Six Flags Entertainment Corporation (NYSE:SIX) stock provided that exact trading pattern in the 2-minute and 5-minute charts during yesterday’s intraday trading. Although I expected the support level at $36.50 to hold, stock buyers managed to shoot SIX stock price up to $37.25. The trending channel was verified 3 times both at the upper and the bottom line but then failed to reach new highs. In the end the stock closed at $36.44 but a day trader would be able to make money out of at least 2 trades, which I did!
My first trade was to buy SIX stock at $36 right in the middle of the day. Using the 2-minute chart I set a stop loss of $0.20 per share and given I wanted to risk no more than $100 for that trade, I went on and bought 500 shares. The stock then moved to $36.30 in 2 minutes but I didn’t trade out until it reached the support level at $36.50, winning $0.50 per share. I could have waited to see if it went up to the upper band of the trending channel, but there were already 2 verifications of that level during the day, so I opted to trade safer.
The stock retraced back to the support line of the trending channel and I bought at around $36.50 keeping the same stop loss ($0.20/share). However this time it failed to retest previous high and I closed my position the minute a red falling candlestick went below previous lows, making $0.25/share in that second trade. I consider that day trading pretty safe although SIX stock did not have enough liquidity but the volatility allowed big swings.
As we can see, the stock fell under the support line of the channel indicating that the uptrend had come to an end. Finding that kind of setups will help you become a profitable day trader.