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Monday, December 08, 2008

X - 120808

X is another setup that required some patience - but it paid off.

Price gapped up and pulled back from the opening range high (ORH). I made two entries on this trade - the first was riskier as it happened AT the ORH. The second was more conservative as it was a pullback to the ORH to test that level as support.

Yesterday I mentioned the halfway point between the high (low) and the Fibonacci extension (FE). I received positive feedback, so I included it the dashed lines on this chart. As you can see price paused at that level but formed a nice hammer and broke through within a few bars.

My target was the FE, and it was hit towards the end of the day. Note how price reversed at exactly that level.

(sorry for the box on the chart - I am too lazy to go back and take it out!)

edit - I went back and cleaned up the chart. And, there is further analysis in "Comments".



anarco said...

I took pretty much the same entry (the second one) as you. I entered on the hammer at 11:15. My mistake is that I exited the position after it crossed down the 34MA at 13:30. I wonder what made you stay in the trade?
For me the the fact that buyers were not able to initially take price to the doted line, plus price dropping below the MA were (I thought) good reasons to exit the trade.
Thanks in advance!

Attitude Trader said...

I have similar questions.

I don't expect you to teach me candle formations but aren't the first two candles that touch the 1/2 FE line kind of bearish because of their long upper tails (Shooting Stars?) and the fact that they move above the line but can't close above it? Or is that tantamount to top fishing (which I'm apparently very fond of)?

Or is there a "bigger picture" aspect that I haven't learned yet that would keep you confident in the long position? Am I focusing too narrowly on just those two bars and their action around that line?

Did price being above the MA you're showing (34SMA?) have anything to do with staying in?

Sorry for all the questions but I know that if I saw that forming I would be thinking the move was over...and then I would see that you stayed long and I would have to cry myself to sleep again.


Trader-X said...

Hey guys - first, the 34MA was left in much like the Trend Line box...I was too lazy to take it out (I am still working on my MA post promised last week...maybe this week). But yes, the fact that price was above that level was a factor.

My main rationale for not exiting was because of the previous swing high around 12:30...had price closed back below that level it would have been a bearish signal and I would have set my stop loss around the ORH...just enough to break-even. But that level actually served as support as the lower tail of the hammer bounced off of it.

The action around the halfway level was actually very bullish...one of my favorite setups is a bearish candle with an upper wick followed by a hammer. People who go short on the bearish candle have to exit and it gives momentum to the long side.

Attitude Trader said...

Awesome! Thank you.

No crying tonight...


anarco said...

Hey X~
If you still have it in you to answer one more, here I go:
At 13:30 price broke below the 34MA, wasn't that a concern that the overall trend was changing? Maybe that would be answered in your MA post. Either way, thank you very much!

Trader-X said...

My original stop was below the low of my first entry. At that point, I was still willing to let it go there in exchange for giving it a little more time.

It was bullish that it didn't make it back to the ORH, meaning it printed a higher low (compared to my second entry).

Trader-X said...

I should add that in my experience when price breaks the high and pulls back to test it as support so perfectly, it almost always at least goes to the halfway mark. I don't have stats, but I can't remember the last trade I was in where it did not. So I had a lot of confidence, and was not worried about the pullback or slowness with which price moved. That is also why I added to the position...something that I rarely do.

Anonymous said...

Nice trade X. It was on my list and I saw it setup, but I was maxed out. I took APA and some of the energy stocks that were on equitywatchlist from your previous post. Nice winners all around.