Wednesday, July 11, 2007

Aggressive Gap Trade - JA Solar Holdings Co., Ltd. (Public, NASDAQ:JASO)

JASO gapped down near yesterday's low on the open. I took an agressive short as price took out the round number $40.00 on the 3 minute timeframe above. I covered after it tested the ORL. Price then rallied back up to $40.00 and could not close above it or the downsloping 20 EMA so I shorted again. This time my target was the 38% Fibonacci extension of the previous day high to the ORL. I took a partial thinking that price would eventually move lower but unfortunately that did not happen so I covered the balance when price retested the morning low and still couldn't go lower.

The 15 minute chart below highlights JASO's pivot points. At the end of the day, we have a nice B&B setup at today's PP lows. So far, every test brings in buyers. Will it break tomorrow? I don't know, but if and when it does, my next PP target is $37.00.


Anonymous said...

Hi Jamie,
Why is your target the 38% Fibonacci extension and not the ORL when you shorted it a second time?

The 11.33 bar was a strong bullish one, right after a hammer-like bar. It closed above the 5 and 20EMA. Did that bar prompt you to have any thoughts about bailing out? THanks


Jamie said...

Hi Pat,

My target the second time was the 38% Fib. extension because price could not close above the the downsloping 20 EMA. Weak stocks rally into their downsloping MAs and present good shorting opportunities so rather than wait for the ORL to be taken out I took an aggressive entry, however, the preliminary target was the same as usual.

The first entry was just a quick scalp because I had a good idea that the ORL would hold as support on the first test.

Good eye Pat. I did a stupid thing by not covering my entire position at the 38% extension. I couldn't see the forest for trees, because I was too narrowly focused. The wide view of the 15 minute timeframe shows the PP support at $38.60. Like many traders, I'm stubborn so I stuck with my usual rules (stop above last WR red bar for shorts and vice versa for longs) despite the obvious strength. In the end it I was able to exit where I should have in the morning. So nothing was lost except precious time.