WCG gapped above R2 and the previous day's range. It continued to rally through the morning, and around 11:30 formed a swing high and began to pullback. The decline found support at the 34MA, and WCG formed a nice base and began to rally back towards the morning high.
Just after 2:30, price crossed the morning swing high (denoted by the white line). The entry was a strong green bar that closed above that level, and had support from a rising 5MA (it did have a small upper tail which was bothersome, but overall it was a bullish candle). The next three bars were expansion bars that rallied substantially higher, but they began showing signs of weakness and leaving long upper tails. The exit was on the third bar's close, as the tail was almost half the candle's range (very bearish, especially combined with the tails on the previous two bars).
If you look at the chart below, I overlayed Fibonacci lines in the classic X style - from the previous day's close to the opening range (OR) high. You can see that the entry coincides with a move above the Fibonacci extension, which usually provides the "climate" for such an explosive run.
12 comments:
Just to confirm: I thought a resistance level could be drawn from the close of B1 and forth. However, you would not have taken the 10:35 green bar above that line, since there had been higher closes in the middle? (It appears to me that you wait and take a set up at the break of the highest swing, true?). Charts look very clean. Thanks for your help!
Gabriel-
Thanks for the comment. I am not sure what you mean by B1.
You are correct when you say I am looking for a break of the swing high - but, not just a break...also a nice candle formation (strong bar, hammer) and some other catalyst (like support from the rising 5MA after the break, in the case of WCG).
Also, I like to see nice action on the pullback - something that lasts for several bars and forms a nice base before it moves back up.
Hope that helps.
What prevented you from entering on the high of the 10:40 candle? The 10:35 candle was NR7 and the next one closed just above the OR High while building a bit of momentum. Thanks in advance!
Nice chart. I actually had this on my watchlist for the day but did not pull the trigger.
What prevented you from entering on the high of the 10:40 candle? The 10:35 candle was NR7 and the next one closed just above the OR High while building a bit of momentum. Thanks in advance!
anarco, that was an entry that worked. For me, I want to have more things line up to diminish the risk...in this case, the things I described in my original post and the comments above.
I don't have a lot of luck just entering on a NR bar if there are no other signals...but, that is just me.
Got it. Thanks!
I traded WCG but entered earlier when it found support from the rising moving average.
Cheers!
The volume wasn't great during the morning. But it picked up after 2PM and this was where it broke.
Interesting Jerry. Like X, I don't look at volume. Thanks for calling that to my attention.
Yeah, I remember reading that on X blog as you guys only use volume for sorting.
But if you find a great setup, but the volume is below or very average, will you take it?
Tom...post more DAMMIT!!!!
(Lol)
You're a movie buff. Go see "There Will Be Blood". DDL is amazing in it.
Formerly ADD Trader
http://addtrader.wordpress.com
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