Both Newfield Exploration and Pioneer Natural Resources are trading near trendline resistance, and a...
Trading Setups (Part 2)
07/01/2008 12:00 am EST
Yesterday I introduced you to a setup called the 2B. Today I will show you an example of how this position forms in the market.
Example of a 2B Buy Setup:
Example #1: 2B Buy Setup in Deckers Outdoor Corp. (DECK)
Pros on 15 Minute DECK 2B Setup:
1. Extended downtrend into strong price support at $70.00.
2. Extreme pace on the first drop into lows on the 28th, followed by significantly slower pace into the second test of lows on the 29th, breaking them by just a hair.
3. Strong volume into the low on the 28th with lighter volume throughout most of the second move into lows.
4. DECK begins hugging resistance as it moves into the second lows at the 20 sma and then hugs it again after bouncing off the lows on the 29th before breaking through the moving average.
5. 10:45 ET reversal period on the first setup.
6. Stronger than average pace on the bounce off the second low on the 29th, followed by a slower pullback as it hugs the 15-minute 20 sma.
7. 14:00 ET reversal period on the second setup.
8. No immediate resistance overhead once the 20 sma broke.
Cons on 15 Minute DECK 2B Setup:
1. DECK can often have choppy trading and a lot of overlap from one bar to the next.
2. Increased momentum into the last part of the second low with increased volume, leading to slower initial follow-through on the reversal off that low and a higher risk that it could have tested that low again on a smaller time frame before bouncing more quickly.
More setups in Part 3 tomorrow.
By Toni Hansen
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