If you have been reading my blog for any amount of time, these are the things that should be screaming for your attention!
1.) What did I see?
A gap up and wide-range, strong first bar followed by a wide-range, weak second bar that takes price back down to the retracement zone (from the previous day's low to the opening range high). The third-thirteenth bars bounce around the retracement zone - there is an attempt to rally and then price falls back into the retracement zone. The fourteenth bar forms a perfect hammer - and it forms on support from the 50% retracement (and closes strong above it) as well as the rising 34MA; this is strong support.
2.) What is the entry?
A break of the fourteenth bar high.
3.) What is the exit?
The target was the Fibonacci extension of the previous day's low to the opening range (OR) high; price just missed that target. The position was closed at the end of the day for ~5%.
Notes - some of you may argue that a break of the sixth bar hammer was a good entry - I would agree with you. But realize there is more risk entering on that bar which forms below the 50% retracement than entering on a break of the fourteenth bar as highlighted above. Again, a valid entry just be aware of the additional risk.
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