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Saturday, July 29, 2006

Friday's charts

posted by Tom C:

There are some good trades by readers in "Comments" - check them out and answer the three questions on your own.

On Friday, I discussed the "offsetting bars" that X sometimes mentions - here is the chart. Someone in "Comments" said it is always good to have a target, and LNCR is a classic example of why as it reversed sharply and rallied into the afternoon. Without a target, you would have a winning trade turn into a losing trade.

WITS was a good set-up, with the only issue being that it occurred above the OR low. So X's standard disclaimer applies*.

MRCY was also a good set-up after price fell below the OR low and retraced to test that area as resistance. A lower priced stock that returned ~3% for the move.

*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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