Tuesday, September 09, 2008

Parabolic Move - Lehman Brothers Holdings Inc. (Public, NYSE:LEH)

The first chart is the daily which shows a bearish engulfing bar following the FRE/FNM bailout. That was very telling given that most financials were up yesterday.

In this morning's pre-market post, we said that LEH was gapping lower because the investment talks with the South Korean bank were over. That was the biggest story of the morning and LEH was the most active on my TI pre-market scan.

Initially, LEH formed a bullish rounded base on the 1 min. time frame, but quickly turned lower, setting up a low risk short. As you can see from the 1 min. chart, once price broke $11.50, it set off on a parabolic move characterized by tight red candles. As the move progresses, the candles get wider and wider, culminating in capitulation on a huge volume spike.

Following the capitulation, LEH was range bound between $9.00 and $10.50. Eventually, it broke $9.00 on a head fake. Head fakes usually result in fast moves in the opposite direction, so I jumped in long.

I had to leave at 2:00 on personal business, so that was it for me.

3 comments:

Tyler said...

Jamie,

I was hoping I would see LEH on your site today. I had put my list of gappers into my new scan, but because the 3rd 15 minute bar had a lower low than the 2nd my scanner did not alert me.

I think I will have to tweak it a little because that was too great of a setup on such a low priced stock.

Good luck today!

Tyler

Jamie said...

Hey Tyler,

Not sure if you are referring to the NR7 alert in Trade-Ideas or another alert, but just to let you know, TI calculates NR7 on a continuous basis, so if the previous day ended with NR bars such as LEH on Monday, the scan for NR7 will not likely print NR7 until after 11:00 EST.

Good trading!

Chus said...

This is what I think: Lehman Brothers Bankruptcy