Retracement Trade of the Day - JA Solar Holdings Co., Ltd. (ADR) (Public, NASDAQ:JASO)

JASO (Nov. 27th) was a non-gapper retracement setup based on weakness in the energy sector.

From the 15 minute chart above we can see that JASO carved out a lower high in the opening range, followed by an inside bar and sharp fall into S2 pivot point support. From there it retraced approx. 38% of the move from the ORH to the morning swing low on declining volume, carving out a bearish flag type pattern culminating in a star-like candle with a long upper shadow and a lower high. Notice how price could not close above the downsloping 5 period ema. Short as price breaches the flag pattern.

I placed my Fibonacci extension lines from the ORH (non-gapper) to the morning swing low and my preliminary target was the 38% extension, at which point I booked a partial profit. I usually tighten the stop to the preceding WR red bar, but have been stopped out prematurely on a few trades lately, so now I am allowing for a retest of former support (morning swing low).

After tagging the 38% Fib. extension, it consolidated for a lengthy period before continuing lower. Once volume started to pick up again, it became obvious that a retest of the Nov. 12th low ($47.60) was the target.

Key criteria for the 38% retracement setup.

1. Look for stocks that gap above or below the previous day's range. For non-gapper stocks, look for trending stocks.
2. After a decisive move in the direction of the gap or trend, look for a 38% retracement on declining volume. The retracment could be a flag type pattern or it might carve out a candlestick reversal pattern after the retracement.
3. The move back towards the swing high(low) is usually slow but orderly. Once the previous intraday high(low) is taken out, look for price and volume expansion.