What can $5 do? Read about "Good Karma" and RJ.
I get a lot of questions about the "push through" setup. I am particular about the ones I take (as I am about all the setups I take). The classic setup (for me) would be a gap up, solid green wide-range first bar, green second and third bars that narrow in range (consolidate), close in the top 25% of the first bar's range, with the third bar actually closing at a new high for the morning (but only by a penny or two...).
CBG DIDN'T fit the classic setup, but I traded it anyway. Here is why:
1.) It gapped out of a flat trading range. The first chart below shows a half month of prices and you can see the context of the gap. It also gaps well above the yellow pivot line (R2).
2.) The second and third bars stay above the halfway point of the morning's range - see the second chart below.
Let me be clear - had the gap not been so predominant in comparison to the previous trading range, I would not have taken this setup. But it was compelling because of the reasons listed above.
I entered on a break of the third bar high. My first target was the FE of the morning's range (second chart). If you look at the fourth and fifth bars, you can see a classic bullish setup - a wide-range, strong bar followed by a hammer-type candle that closes near the high. Seeing that I decided to adjust my target, and I redrew my Fibonacci lines in the classic Trader-X style (from the previous day's low to the opening range (OR) high - see the third chart).
Price continued to rally and tagged the halfway point between the high and the FE (white dashed line - third chart). I closed the position on a break of the eleventh bar's low when price dipped back below that line. The total return for this trade was almost 8%, and it was a cheaper stock with high volume (easy to enter and exit).
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