I noticed both HMC (Honda) and TM (Toyota) gapped down this morning. While TM did not give a textbook set-up, I entered on a break of the second bar high because I figured that TM and HMC would closely track each other (TM's second bar did stay above the opening range low set by the first bar, and was an inside bar). See the TM chart at the bottom of the post.
HMC DID provide a textbook set-up, and both trades performed well.
1.) What did I see?
A gap down with the first bar rallying off the low and closing strong. The second bar is narrow range, an inside bar, and a hammer.
2.) What is the entry?
A break of the second bar high.
3.) What is the exit?
The target was the retracement zone from the previous day's high to the opening range low; it was not hit. Whereas I entered TM based on HMC, I exited HMC based on TM - which DID hit the retracement zone (exit was ~1:00). If you were not watching HMC, you should have exited in the afternoon when TM started to break down out of the consolidation at the day's highs. It was a good trade regardless of which exit you took.
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