Box Trade - Apple Inc. (Public, NASDAQ:AAPL)

A reader asked what is the easiest setup to master. I would have to say that basic chart patterns such as C&H, flags, and H&S along with the box trade are relatively simple setups to execute. I usually look for box trades from my watch list. I look for stocks basing in a narrow range over a period of three days or more. The longer and narrower the box, the more powerful the setup.

AAPL had been basing for 6 days between $84.75 and $88.00. Today it moved out of the R-zone and stair stepped towards the base at $88.00. I usually set an alert inside the base so that I know when to start focusing on the setup. If price moves sharply into the base, it needs to consolidate that move before breaking out, so patience is required to spot the correct entry. AAPL carved out an inside bar (NR7), green on green, which is my favorite for longs.

FWLT had developed a box over the minimum three days. It moved sharply towards the base and retraced 50% allowing for a scaling in, ambush setup followed by additional size after it moved back into the base and printed a tight, narrow handle at $24.00 on the 1 minute chart.

Use Fibonacci as opposed to pivot levels to help plan the exit strategy. The pivot levels are usually tight after a stock has been in a narrow box over several days, so the R2/S2 levels are usually easily taken out.

CELG was a failed C&H pattern. I set my initial stop 2 pennies below the previous (outside) bar low. I eventually tightened the stop as depicted by the red line segment because the setup looked hopeless and I was stopped out. My initial stop would have been been taken out by 1 cent, followed by a reversal and full extension of the measured move of the pattern. Once a pattern fails, it's hard to get back in because you don't trust it anymore.