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Thursday, August 24, 2006

POOL - 082406; 15-minute chart

POOL gapped down below the previous day's range, and printed a weak wide-range first bar. The range narrowed in bars two through four, with four being a narrow range (NRM), inside bar. I entered on a break of the fourth bar low*.

The target was the Fibonacci extension of the previous day's high to the opening range (OR) low - as I mentioned earlier, the fifth bar collapsed and actually closed below the Fibonacci extension. That is usually a sign that price will continue in that direction, so I held the position. Had it closed back above the Fibonacci extension, I would have immediately covered my short. Instead, price continued to fall and I covered on a break of the fifteenth bar 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.

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1 comment:

Dave said...

Excellent trade X.

I only have one question: How did this come up on your radar for the day? I couldn't find any news related item for POOL, upgrade, downgrade, etc

I've noticed most of your trades usually have some type of pre-market event.