Stocks broke out of a two-day holding pattern yesterday morning and then stalled, presumably to wait for that mote of benign economic news that can be relied on to stir up some short-covering. There wasn’t enough news on the tape yesterday to stir up much of anything, even by Wall Street’s liberal standards. Just an item suggesting that manufacturing in the New York region had “unexpectedly” increased, and another item that had the U.S. and Britain thinking about tapping the ol’ strategic oil reserves to help “calm” energy markets. Fortunately, however, from a trading standpoint, the day was hardly a wash for Rick’s Picks subscribers who attended the tutorial session that we give every Wednesday morning for graduates of the Hidden Pivot Webinar. (Click here for details concerning the  upcoming class, and get a $50 discount.) Students are advised to come to these classes ready to trade, and although we don’t always have an opportunity to pull the trigger during the sessions, a moderate breakout in the E-Mini S&P Thursday morning gave us good reason to act.

The pattern we used to initiate a long position is highlighted in the chart above, and the means that we employed to leverage it is called “camouflage” trading. Essentially, this technique entails identifying very subtle breakouts that are likely to go unnoticed by conventional support-and-resistance traders. In this case, we had to zoom in on the 5-minute chart to find a precise “camo” rationale for getting long. Typically, we risk no more than five ticks theoretical, or $62.50, when we get long or short in the E-Mini S&P.  This trade called for a bit more — $87.50, to be precise – and so we initiated the trade on one contract rather than the usual four. Because one student had purchased five contracts on the entry signal, however, our follow-up guidance for the trade contained risk-management strategies for a single-contract and a five-contract position. Both positions were still “live” as we went to press Thursday night.  For your interest, here is the “tracking update” that went out to subscribers intraday. It is still in effect: “We got long at 1391.25 (June contract) during this morning’s tutorial session, so I am establishing a tracking position.  Although one person in the room bought five contracts on the entry signal, I had cautiously advised a single-contract trade. Accordingly, and because we are swinging for the fences on this one, I will suggest a trailing stop that effects a 1:3 risk/reward.  Our target is 1412.75 (Daily chart, A=1291.25 on January 30, B=1371.25 on February 29), and so, with the futures currently trading at 1396.00, the trailing stop is 5.75 points.”

Please note that the “fence” here is the 1412.75 target noted above. A single contract exited there than had been purchased for 1391.25 would produce a trading profit of $1075. That number is a Hidden Pivot, and we expect it to be  tradable from the short side if and when it is reached. If you’re interested in following along, or in hearing more about “camouflage,” you can ask subscribers about such things yourself. Click here for a free trial subscription to Rick’s Picks that will give you access to our 24/7 chat room, as well as to Rick’s detailed daily trading recommendations.

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