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A lot of stocks are breaking out and setting up to go higher. I am trying to trade in the direction of the trend. So lets first take a look at the 1 year daily, 10 day 30 min, and 5 day 15 min charts to dig a little deeper:
First take a look at the top chart to get a visual of the primary trend of the stock. It is obvious that this stock is in a uptrend and I have highlighted the serious of higher lows as well as the few times they were breached and when the stock crossed back over it was able to continue its uptrend. It recently broke out from resistance at about 32.5 which is highlighted on the 30 minute chart in bottom left corner. The stock has since then been consolidating this move.
I think that a good entry is anywhere between 32.80-33.15 based on the 5 day 15 min chart at bottom right. The stock is currently trading at 33.07.
I am looking to play on the continuation of the trend to the upside. I want to buy 5 May '10 $33 calls @ 1.54 or better. Lets take a look at the profile below:
I think this stock is setting up very bullishly and has room to the upside to 38-40. In order to get some price targets I actually had to look at a 4th time frame as you will notice there is nothing to the left in the form as resistance levels on any of the time frames I showed above. So take a look at the weekly chart below and take note of the bull flag forming:
Entry: 32.80-33.15
Stop: Break below previous resistance of 32.50 found on 30 minute chart.
Target: 38-39
Time Frame: 4-6 weeks
Risk: $160-$200
Reward: $1800-$2700
Ratio: 1:9 (risk 200 to make 1800)
I will want this one to trade in my favor rather quickly otherwise I will cut the position in about a week if I am not green in it yet.
As I wanted this thing did trade in my favor quickly. It is now trading at 33.52. I will raise my stop from 32.50 to 33.
ReplyDeleteAs I had mentioned, I want to be long but I think while were are so close to a big resistance level it is going to be important to keep you stops tight. I am trying to be very prudent about my risk management and move up my stops as the stock trades in my favor. I am not feeling the same strength in A as when I first entered it. It violated the uptrend on the 30 minute chart which I am using as a signal to sell for now.
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