Tuesday, August 19, 2008

Inside Bars - Canadian Natural Resource Ltd (USA) (Public, NYSE:CNQ)

After two narrow range days, CNQ tested support in the OR and carved out 3 IBs on declining volume - contraction before expansion on the 15 min. Using multiple time frames to time the entry, I put in a trend line using the ray line tool in Esignal which extends forever. I don't want to stay in the trade if the trend line is breached on a closing basis - refer to 1 min. chart below.

The entry sets up at P so it looks almost perfect. Price consolidates at P with a series of higher lows within the initial trend line. After breaking out, price makes a vertical move higher on accelerating volume = expansion. At first I was thinking flag pole, but the tweezer top foreshadows a reversal, so I take a partial to lock in some profits. The trend line should hold as support, but I draw in my Fib. retacement lines just in case. The retracement takes place on declining volume and stops at the 50% retacement level.

Once price makes a higher high, I start tightening the stop. Eventually I have to draw in an accelerated trend line because price moves too far, too fast. Once the accelerated trend line is breached, you can exit the second half. I missed it and ended up staying in the trade until the original trend line was breached after one final test of resistance at $78.50

Once LEH broke its early trend line and closed below S2, it was safe to short. LEH is now a $14.00 stock so half $ levels are important in addition to whole $ levels so if price stalls at these levels, book some profits.

1 comment:

bl said...

Great...add your fav Canadians: eca su tcj