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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8 comments:
HI X,
Nice trade. Can you give some insight as to why you did not sell some of the position after the 4th bar. The 4th bar high was close to the FE. Since you held after the 4th bar what made you still hold as the price dropped close to your entry during the 5th bar.
Thanks
DEM.
Nice breakout with big volume. Could be good for some follow up trades.
DEM - The fourth bar closed strong, and I expected the FE to be hit. I figured it would happen at the beginning of the fifth bar, but price pulled back. It didn't break the fourth bar low, though, so there was no reason to sell that I saw. And then the bullish pattern I referenced in the post developed at the close of the fifth bar.
nice trade
Hi X,
nice trade,
I traded AMB yesterday and would ike to get your thoughts on this trade and whether it is a setup that fulfills your criteria and whether it's a setup you would have made.
The price gapped down, but the the first bar was bullish and I entered on a break of the third bars high, which was an "in the tail" type setup. I was mindful that the entry was around the previous days closing level which might have provided some strong resistance, but once this was cleared I let the trade run and made some nice profits.
I just wanted to say thanks, because I wouldn't have spotted thus setup without the great insight and advice you provide on here
thanks
Mark
sorry, forgot to say AMB was off 10 min charts
Hey Mark - I like the setup, but not the location. For me, the gap wasn't big enough and as you pointed out it was rising into the previous day's close.
But, that is just me. It was obviously a great trade, and again just looking at the setup without any other context, it was a nice three-bar pattern.
thanks X for the feedback, it's much appreciated
Mark
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