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Monday, March 27, 2006

Patience pays off sometimes

I was holding FTEK for most of the day, watching it go sideways after my entry. At 1:00, it actually offered another compelling set-up (marked on the chart - a narrow-range hammer on support from the OR high), and rallied from that point to hit the target three bars later. Here is the original set-up/entry:

1.) What did I see?
A gap up and strong, wide-range first bar. The second bar is a narrow-range, inside bar that forms a nice "hammer-type" candle in the upper half of the first bar's range.
2.) What is the entry?
A break of the second bar high*.
3.) What is the exit?
The target was the Fibonacci extension of the previous day's low to the opening range high; it was hit just before 2:00.

Set-up grade = B (it was below the OR high)

*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. FTEK broke above the OR high on the third bar and never closed back below it.

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