FMCN was an earnings gap which retraced 38% of the move from yesterday's low to the ORH then consolidated sideways for over an hour until the 5 period EMA caught up to price. At first this setup did not seem all that compelling because the consolidation candles had upper shadows. However, I placed a buy stop order above the highest shadow and when price broke and held above the shadow on a closing basis, I had confidence in my decision. Although price did not reach the 38% Fibonacci extension, it did generate a +1 pt. profit.
Friday, May 18, 2007
Dummy Trade of the Day - Focus Media Holding Limited (ADR) (Public, NASDAQ:FMCN)
FMCN was an earnings gap which retraced 38% of the move from yesterday's low to the ORH then consolidated sideways for over an hour until the 5 period EMA caught up to price. At first this setup did not seem all that compelling because the consolidation candles had upper shadows. However, I placed a buy stop order above the highest shadow and when price broke and held above the shadow on a closing basis, I had confidence in my decision. Although price did not reach the 38% Fibonacci extension, it did generate a +1 pt. profit.
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2 comments:
In real time, wouldn't you have bought on the 4th bar when price moved past the high of the 2nd and 3rd bars?
Anon,
If you were blind and brainless, you might buy on the 4th bar, but there's no setup there.
The first bar is a wide range red bar. There's no candlestick reversal pattern in the 2nd and 3rd bars. Why would your trigger bar be a doji - indecision? Why would you enter on such a weak setup when your 5 period MA is miles away?
The 6th bar is NR7 which usually precedes price expansion. That's the trigger bar. By the time the 7th bar takes out the high of the base, the support of the 5 MA is very close to price. Look at the 5 minute timeframe to see a perfect ascending base and break pattern at my point of entry.
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