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In this article we highlight Blue Chip Trader - BLUEX, authored by senior technical analyst Scott Smith, who provides technical commentary on large-cap, high-volume stocks and includes specific trading recommendations. BLUEX coverage can be found on our Briefing Trader service.

I'm a combination of a Day and Swing Trader, averaging approximately 2-5 trades each day, dependent on broader market conditions. My focus is primarily on higher-priced stocks trading above $50 with plenty of volume (liquidity) and volatility (measured by ATR). I tend to favor trading Index and Sector ETFs on the Short side, especially when it can be applied as a "hedge" against any existing profitable Long balances that I may have. The Liquid Momentum Focus List (LQDXX), Emerging Growth List (GROWX) and the TA PAGE Scans (BLUEX) are my main sources for finding opportunities. I look for low-risk entries, based off popular technical patterns, often timed at certain points in the day when the S&P itself is near a key Support or Resistance zone.

• Risk/Reward: Most of my trades start with just a 1:1 ratio as I think it is prudent to reap some reward when it is equal to or greater than initial risk. For example, if I'm risking $1, I'll be looking to bank a partial profit on the first +1 in my favor and likely each +1 thereafter if possible. I will raise/lower the stop order on my remaining balance to trail behind price after each partial taken. I always post a Risk for all my trade, so I highly recommend no waiting for my updated post on the site to take a partial profit or loss, especially in faster moving markets and stocks.



• Position Size: I learned long ago (and painfully so) that I can't hit homeruns. I trade to hit "singles" and look to stretch them into "doubles," maybe getting the occasional "triple." My goal is to consistently make money over the long haul; not risk big and get rich quick. I do so by trading small size, usually just a few hundred shares of stock, depending on Price, Volatility (ATR) and as a percentage of my existing capital. Bottom line, you should trade a position that is comfortable for you to sustain a string of losses, yet still get a good night's sleep.



• Swing/Overnight Trades: 90% of my trades start off as Daytrades and the successful ones into the close are those that I will often hold overnight for a Overnight/Swing opportunity. They are usually about 1/2 to 1/3 of my original size and have already taken a partial profit of at least +1 on the day. I rarely carry a Losing trade overnight, unless I am "hedged" with an ETF or option.



• For Market Timing: I pay close attention to the 5-min action on the SPX, monitoring key pivot support and resistance zones as well as prior Closes, Highs and Lows. I analyze the day itself into 4-different segments (Opening Ranges, First Hour Ranges, Midday and Afternoon), which I often summarize throughout the day under BLUEX Notes. I rarely trade the last 30-45 minutes of the day (and almost never on Expiration Days). Majority of my activity is done in the morning hours leading into midday. I try to post a Daily Recap before the close each day, summarizing my trades so you can learn from my success (and failures), as well as keep track of open positions.

All of my set-ups are technically based and the patterns I reference should be very clear and easy to confirm by looking at a 5, 15, 60-min or Daily Chart. If you don't see the trade like I do, then I highly recommend passing on it. There is always another opportunity setting up soon, so best to err on the side of caution, than to overtrade or be confused.

--Scott Smith, CMT, Senior Technical Analyst