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Tuesday, September 27, 2005

SWN - 092705

1.) What did I see?
A gap up and weak first bar. The second bar tries to rally, but does not take out the first bar. The third bar is narrow range and a bearish candlestick.
2.) What is the entry?
A break of the third bar low.
3.) What is the exit?
When playing weakness in a gap up, I always make sure there is room to the 38.2% retracement of the previous day's low to the opening range high. That is always my target, so if there is not enough "white space" to make a decent profit, I pass on the trade. This proved textbook on SWN - it reversed exactly at the 38.2% line.

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