The Great New Pattern - LEND
Published March 16th, 2007 in Technical Analysis, Trading Tags: accredited home lenders, candlesticks, elitetrader, hedge fund, hedge funds, praetorian.
The recent price action in Accredited Home Lenders (LEND) reminds me of “the Great New Pattern” invented by praetorian2 (aka Harris B. Kupperman) over on elitetrader.com
The pattern is massive capitulation by the longs marked by sustained selling. The key factors are not only back to back price delines but seeing a decline accelerate (wider range candlesticks to the downside). Volume is also an important factor since it tells you how more and more longs are getting sucked into the selling by having their stop losses triggered or just panicking.
At the maximum point of anxiety, you watch for possible reversal. And at that first glimmer of light, you start scaling in. Kupperman actually scaled in as price was falling, anticipating the V bounce. This is very risky but he had made this pattern his own and knew instinctively how to lower his basis point without getting his head chopped off. The exit strategy is also piecemeal, if I remember correctly.
Here’s an example from the archives (way back in 2001):
For more information, on this set up check out the original thread on the GNP by praetorian2 and this follow up one by Robert Tharp.
We hear a lot that success in trading comes from finding your own way. This is a great example of that. Since Harris first ‘found’ this pattern it has continued to be repeated over and over again in the markets. And by consistently playing this setup he went on to great success as a trader.
Last I heard, Kupperman is still running his hedge fund, Praetorian Capital Management (with an offshore clone), and has assets of ~$6 million under management.
accredited home lenders, candlesticks, elitetrader, hedge fund, hedge funds, praetorian
Enjoyed this? Don't miss the next one, grab the feed or
7 Responses to “The Great New Pattern - LEND”
- 1 Pingback on Mar 17th, 2007 at 5:20 pm
- 2 Pingback on May 29th, 2007 at 9:43 pm
Leave a Reply
Search
Trader’s Narrative is powered by
this works on the intraday chart as well…i was short the mini NY crude contract when it tanked…i covered into the capitulation, but didn’t have the balls to reverse my position…the funny thing was that it even offered a low risk babak/dummy style play on the long side
with these wild swings lately, it has definitely given plenty of opportunity…it may be time to sack up and try it
Nice trade John. I think Jamie is the only trader I know who regularly takes both sides (up and down). The guy is a machine!
The concept of euphoria and capitulation has long been one of my favorite patterns during market reversals. I learned how to trade this setup from reading Techniques in Tape Reading by Vadym Graifer. The Graifer book is the best daytrading book I’ve read and is of particular interest to students of price/volume relationships.
Hi Babak,
I am always interested in a high probability pattern. This one however, on the surface, seems to be higher risk.
Is it possible to generalize the following:
1. What would be the signal to enter?
2. Where would the initial stop be placed ?
3. What would be the exit target level?
Phileo,
you are right in being cautious. I wouldn’t recommend you approach this pattern carelessly. Re your questions, I would suggest you read the threads on elitetrader