Tuesday, December 12, 2006

Steel Dynamics, Inc. (Public, NASDAQ:STLD) - Critique of Zoomie's Trade

Zoomie asked me to critique his STLD trade as pictured above. From a thirty minute timeframe, there is nothing to critique. Everything, from the entry, volume pattern and tweezer bottom reversal pattern are correct. Zoomie also has an uncanny ability to manage his stops and limit losses when a trade starts to go against him.

So, why didn't STLD generate a profit?

Pivot point support: After recently testing all time highs, STLD gapped lower and fell hard on the open. The only thing that saved it from going lower was a wall of pivot point support. The first test of notable support and resistance usually holds. The daily and 60 minute timeframes below highlight the support area.

From my own experience, it's not always possible to check longer term timeframes when stalking the perfect entry. But as soon as the trade is well underway, I like to check my support and resistance zones and map them out on the lower timeframe.

Hope this is helpful.


Dave said...

I made the same trade in STLD. It certainly did seem like a wall of unwavering support at that level. Thanks for the analysis, Jamie.

Jamie said...

You're welcome Dave.

Zoomie said...

Yes, thank you for the critique! Makes perfect sense.

Jamie said...

You're welcome Zoomie.