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Tuesday, November 14, 2006

Tuesday's action

The homebuilders provided some good set-ups today. My favorite was KBH - it gapped up, had a brief pullback (in the second through fourth bars), and then rallied back above the opening range (OR) high.

Note how the eleventh bar broke through that level, and the next two bars consolidated with narrow-range, inside bars. I entered on a break of the fifteenth bar high; the fifteenth bar began to rally off the OR high (which was now support) and the rising 5MA. Price hit the Fibonacci extension of the previous day's low to the OR high at the beginning of the last hour.




Some of you may have taken a more aggresive entry off the fourth bar "hammer-type" candle (at support from the 5MA). If so, kudos to you.

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3 comments:

John Wheatcroft said...

X - as far as I'm concerned that 4th bar hammer after the double bar backup is an automatic. Maybe you want to wait one more bar for confirm and take the trade when that bar breaks the open of the third but I think this is a high probability, low risk trade just taking if off the hammer.

I've got a hundred charts that show that pattern over and over again - always with a good result.

I personally think the tip off is the doji at the first bar coupled with that huge volume- when I see that I always watch for the back off to the short MA (you know I use 4 EMA vice 5 MA - in this instance almost the same thing).

Anyway a great trade. I played a similar one in GLW today. Hard not to make money on a day when almost everything goes up.

Barry said...

Good trade X. I caught DHI on a break of the 10th bar.

QQQBall said...

John W,

thanks for the comments and the doji/volume filter... ive been using "X-type" analyses on the Canroys recently - most have been gapping down everyday...