The three options I see available are to either set a buy stop order above the high of the day, a buy limit around the 50% retracement, or look for opportunities to go long Intraday. A safer option would be to place your stop beneath the 200eMA (around 494) or alternatively you could also use the 50% retracement for your stop if using the high of Friday to enter. Although I’d like to see the stochastic generate a buy signal prior to entry, I tend to find these only happen after the move has already taken place so I’m more than happy that the indicator is in the oversold zone.
Morgan Crucible Company Plc: MGCR
This is a trade I entered on the 5th Jan which I’d consider to be a textbook ascending triangle. I got stopped out on the on the 13th after being a little too tight on my stop-loss, but in retrospect I’m quite glad as it does seem to have lost it’s pace.
The move however isn’t over and may still have another go at the target of 288 – if I retraces further and turns 255 into support then I will look to re-enter with a relatively tight stop (probably around 249)
Breakaway gaps are usually seen after a market reversal and are a confirmation of the new trend. The heavy volume also adds weight to the move, and the gap itself is an ideal place to put your stop-loss.
Although I missed the original gap I believe there may still be an opportunity to go long as a 2nd gap has now appeared (also on a heavy volume day). Runaway gaps have a tendency to appear around the middle of a trend, which in turn allows us to project a likely profit objective – runaway gaps are also called measuring gaps for this very reason.
It’s a shame I didn’t see this sooner as Friday would have allowed for a much tighter reward to risk – but even setting a buy stop order above the Friday high, with stop beneath 111.7 will allow potential for a 3:1 reward to risk trade.
The chart below is the monthly chart of the Dow Jones industrial from 1923 on a logarithmic
scale. I’m trying to isolate the major cycles to provide me with a greater idea of future direction.
By taking a closer look at the weekly chart I can now project possible turning points which will aid with wave counting and future direction. This is by no means a precise method but will provide a general framework from which to work from.
To put it into context – here’s the original chart on a linear scale. A couple of thoughts spring to mind…
– The ‘Swinging 60’s’ weren’t that swinging for stocks…
– If a head and shoulders has been forming since 1998 then it won’t be confirmed until the Dow drops below 7000… The target would be somewhere around the floor, and I’ll either be exceedingly rich or wiped out for good – either way I doubt I’ll be trading….
– If we really have began a new bullish cycle we’ll be taking out the 2007 tops with ease.
There is a Gann cluster around the 6474 but at present have no idea of how long it will take to get there. I intend to study FTSE cycles to aid this but need access to more data.
FTSE narrowly took out November high but struggled to turn this into support – for the last 3 trading days of last week it was range bound between 5900 and 5850, with Thursday producing a Doji and Friday finishing down with 1.5 billion shares traded. The last time this happened at the end of November it turned out to be a pivotal point, so interested to see if it retraces to one of the red Gann lines before having another go at turning 5900 into support. If it convincingly breaks resistance @ 5917 I’ll be aiming for the Gann cluster around 6474.