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Thursday, March 09, 2006

DIET - 030906; 15-minute chart

This took all day to unfold, but was worth waiting as it provided an 8%+ move.

1.) What did I see?
A gap down and very wide range first bar. The second, third, and fourth bars consolidate below the 50% mark of the first bar - a bearish sign. And, the second and fourth bars leave upper tails/wicks - another bearish sign. All three bars narrow in range, with the fourth bar the narrowest range of the morning; it also closes weak.
2.) What is the entry?
A break of the fourth bar low*.
3.) What is the exit?
The target was the Fibonacci extension of the previous day's high to the opening range low. It was not hit, and I closed the position at the end of the day. Note how DIET retraced back to the OR low around lunch time - but the bars narrowed in range, price rolled over, and it resumed the downtrend.

Set-up grade = B (the entry was above the OR low)

*as with any entry below/above a previous high/low (in the case of my charts, the opening range (OR) high/low), you need to watch for resistance/support as price approaches those levels. If it stalls, you want to exit. If it breaks through, the odds are good you will have a move to the corresponding Fibonacci extension.

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