Technically Speaking: Reversal and Bounce Patterns | Cameron May | 9-16-19
Good. Evening and welcome everyone, my name is Cameron, May and I want to welcome you this well, it's actually this afternoon's, discussion of. Technically, speaking I'm, filling, in for John McNichol, and the day's discussion is reversal, and balance patterns and I'm, looking very much forward to it I just had to check something on the stream looks like we're in good shape now but, here's, what I have planned for today we're gonna be talking about what might a trader look for for. Reversal, of a trend and then we're going to take a little bit of a different, approach to. A bull flag entry. Now you've probably heard of using a bounce entry, on bull flag but, how might both, a bull flag trader. Anticipate. The, entry on a bull flag that's we're gonna be talking about delay today hello. There Michelle Arturo. Alfred. Welcome back all of your returning veterans thanks for coming back week after week thank you for your contributions. There very much appreciate, and I think it helps with everyone's purpose a personal learning curve if. You happen to be here for the date for the very first time in today's webcast I want, to welcome you as well, and if, you're listening in on the YouTube, archive, if you've liked if you would like to join John, in his regularly scheduled, session if you'd, like to jot it down two o'clock Eastern, Standard Time on Mondays, is when he talks about reversal, and bounce patterns, all. Right now with that said here's how we're gonna tackle. Things today we're gonna take a quick peek at risk. Information we're, gonna take a look at an agenda, that I have prepared and then, we'll get right to, reversals. And bounces, so. Quick. Reminder some important information, any. Investment. Decision you make in your self-direct, account is solely your responsibility, paper. Money success is not a guarantee they're gonna have some fun to have success with your real funds. Past. Performance, of any security or strategy is not guarantee future results or. Success we, are going to be using real examples, in today's discussion please, do not take that as a recommendation or endorsement, or any particular security or strategy, finally. Here's an overview of the Greeks for those of you who do use technical analysis for the trading of options all, right so let's go to, the. Thinkorswim, platform and. We. Have three items on the agenda as I mentioned, first of all we're going to be discussing how might. A chart, user. Identify, a reversal. Of a trend then. Once we've established the, day where we're gonna be focusing on bullish trends, we'll. Talk about how a bounce, may be anticipated. In a bow fly again in a bull flag pattern and finally. We'll get some application, we're gonna do some repetition, we're, going to look at some current examples, so through the accomplishment, of those three agenda items what, I want you to walk away with the primary. Thing is that, focus on how might a bull flag trader. Anticipate. The bounce all. Right so, let's. Do it first. Of all starting. With this reversals. Discussion. How. Might a technical, trader identify, that, a trend that had previously, been in a downward, slope or a downward position, when. Is that moving back, up into an, upward bias, so, what. Maybe what we'll use here is a wk. As our example, and if. You were in my discussion, from just about two and a half hours ago I taught, my getting. Started with technical, analysis, I'm going to tie this discussion, back to that because in. That presentation, we focused on trend identification. And using, simple, moving averages. Was it, was a topic of conversation. So, let's I'm, going to add a simple moving average to this chart I'm actually gonna do two.
Simple Moving average averages. And it's going to be the relationship. Of those two that. Might provide a technical, trade or some insight into the, current trend. So. I'm gonna click on the Edit Studies icon, we're. Going to type in the word simple, for. Simple moving average, now again if. You're not terribly comfortable with, technical, analysis, if you're just getting started with charting, what, I would definitely, recommend that you do is check out my, presentation. I started to promote myself but I actually just happen to be the one who teaches this session that's titled getting, started with technical, analysis, and that's. Every. Monday morning 11 o'clock Eastern Standard Time, but. Let's choose simple here and I'm gonna go to simple moving average, and I'm gonna add two, simple. Moving averages, to our chart and then, we're gonna customize, these I'm. Gonna come over here to the edit icon it, looks like a little gear let's, change this first moving average to, a 10, period. Moving average and, I'm gonna change that one to red. And let's, make it nice and thick so everybody can see it I'm gonna change the width to a five on a scale of one to five we'll, click okay and. The second moving average click. On the little gear icon we're. Gonna change that to a forty period moving average I'm. Going to leave that one green to, distinguish it from the red ten, period moving average but. I'm gonna change its width to five, click. OK again and then, click apply, and what we'll see now on. The chart, are two, lines now the the the, purpose, of these lines the conceptual. Purpose here is to identify an. Intermediate. Trend and a, short-term, trend so, the intermediate is is. Drawn, using a period of right now forty, days. This. Short term is, constructed. Using a period of ten days but, I'm gonna switch this up to. A weekly, time frame so I'm gonna come to our time frame and how, about you. Know what let's go to a one-year chart but I'm gonna switch this to weekly. There. We go and, then click OK and some. Of you may. Actually I might even need to go to a longer term chart how about we come up here go, to the default. 3-year, weekly chart there we go. But. Some of you may already be familiar with, this. Particular, pairing. Of moving. Averages, a 10-week, versus, a forty week and what, some technicians, will look for is when, the ten crosses, up and through the, 40 that. Might be an entry, that a that. A downward, sloping, trend is strengthening. Into bullishness if you, have the 10 week. Crossing, back down through the 40 as it, did right here that, may indicate that a previously, established upward. Trend is weakening. Into, bearishness. All. Right so the most recent example here with a wk, is the, 10 crossing up above, the 40 so, Paul Arturo Ricardo, Alfred, Michelle I have a question for you what, do we call that when, the 10 crosses up above the 40 when, the shorter, term trend strengthens. Enough that, it seems to now be encroaching on the longer term trends, bearish. Territory, maybe pushing it up into bullishness what, do we call that 10, crossing up above the 40. That is known as a. Golden. Cross now I didn't give it that name I always say that somebody had a flair for the dramatic, when, they named that but. A golden cross at least the titling, paints, the correct intended, picture it's. A hint that a trend. Is now strengthening. And that, that a technician might expect. Things to look more, bullish from there forward and in this case that's what's panned out for a wk. So. That's our example, set. Up for the day. Before, I move on from that though what do we call it when the 10 crosses down through the 40, remember. That flair for the dramatic. Now. On Johnny C's it also as momentum change could also be yes yeah. But. When we see the 10 crossing down through the 40 some. Technicians will call that a death. Cross again. Yeah pretty dramatic, kind. Of kind of morbid if you want my opinion. But. At least it paints the correct, intended, picture again it's, it's, a bearish, outlook for, that stock but in this case the, most recent, signal that we have is a, strengthening. Of the trend with, a Golden Cross and that, may set the stage so we've looked at how a technician might look for a reversal. But. Once a trend has, reversed and, is now established a, technician.
Might Then take the second, step to, look for entry, signals within that established, trend so. We're gonna kind of shift our focus at this, point I didn't want to spend too much time on the 1040 crossover, setup sometimes, I'll spend a whole hour just talking about that we'll talk about. Examples. Of that but. We'll, work that into our examples, through, the rest of our discussion but. Within an established, upward, trend, are there, ever periods, where, a technician. Conceptually. Might. Do better to sit on the sidelines, even though you have a bullish stock and, at. Other times maybe. Technical. Scenarios. Seem to be more conceptually. Optimized, yeah as the. Stock makes its way higher, it typically doesn't just go straight up although for periods of time it might appear to but. Instead there, will typically be a series. Of, higher highs and higher lows a, stock, will move in a stair stepping or a wave-like pattern on its way up and so. Within within. That. Stair stepping pattern, that. May present better, technical, opportunities for entry, and. So, too are we looking for entry at near peak certain air troughs at. The top of waves near the bottom probably. Near the bottom right. Well. There. Is a technical, pattern. That, leans kind of heavily on this, stair stepping behavior, and it's, called a flag, or, a bull, flag in this case it's called a flag pattern so. We're gonna move into this part of the discussion, where, we're looking for bounce entries. So, I'm gonna switch now from, our weekly chart back to our daily chart I'm actually to get fairly close and granular, so we're gonna go from this weekly chart I'm, gonna switch to a custom, time frame and go, for let's. Try that again time. Frame we're gonna go to, the three-year area and switch. That just back to the six month view. With. A daily. Aggregation, period I know you're probably wondering what in the world is an aggregation tray it's fancy way of saying this the candle, so. It's a daily candle click. Okay all. Right so here, is, just. To revisit those. Cycles, look, at this shorter, term moving average you can kind of see it going through waves it, runs up and then it pulls back and it runs up and it pulls back that's. Another technical reflection, of this stair stepping pattern, that, we might anticipate. Seeing, and. Within. That pattern a. Bull, flag, pattern. Might. Be used by a technician, to, identify, entry seing entry, of signals. All. Right so. A bull flag if you're not familiar with it it, starts with an acceleration. Of a. Previously, established upward. Trend alright. So, that might be this period right here. You'll. See the stock rallying, up you. Know it's taken a few breathers, along the way but, for the most part in this case we went from a hundred and fourteen, dollars up. To all yeah right about $130. That's. About a 16 dollar rise on. $110. Stock that's about 15%, in, a fairly, short period of time so, something, is obviously gotten, traders, of a wk, excited. Now. What that can do from. A technical, vantage, point is it can it can attract, new, eyes, wow did you see what's happened with a WK it's gone up 15% over, the last you. Know whatever this happens to be six, weeks or so, do. You think that some shorter, term traders may. See that as an opportunity they might write, even, a longer term investor, might it. Might attract their attention as, well however. I think it also makes sense that. Even. Though there is temporary. Momentary. Excitement. Because the stock has rallied, so sharply of such a short period, there. Might also be, investors. Saying well yeah that looks nice, however. The. Fact still remains the, thing has already rallied. 15, ish percent over the last six weeks so. We might be near a short-term peak so. What a technical, trader might look for then is, some. Release, of pressure, some. Profit, taking so. This, is, what. We might see as the stock pulls back and. This. Is this creates. What we call the flag portion. Of the. Flag pattern, so if you look at the at. The acceleration, where the stock is rallying, up that's, the flagpole and then. As we're pulling back that's. The flag itself and I think you can now see why it's called a flag it kind of looks like a flag they might han't have hanging off your porch or your.
Patio For. The fourth of July or whatever right. Hanging. Out there at maybe a 45 degree angle maybe, sometimes, a little bit steeper with, a bull flag steeper. Is typically the preference versus, a shallower, rate. Of incline. So. That's a setup. But. What, we're talking about is when, do we enter what, is the bounce. Signal, so, what have you heard what's what's the typical, phrase that we use of you have you heard this before it's, a it's. An acronym, it's an abbreviation. Close, above the high of the load a hold or K hold or CA hold or however you want to pronounce a. That yeah. What a trader might look for is as. Those, profits, are taken and as the stock price falls back, they. Might look to identify the. Lowest day, in, that flag pattern, and. Maybe what I need to do here is let's clean this up for just a moment so. We're back here looking, at just the flag portion. Of the pattern and, a trader might look for the lowest day, and you. Might see here, that, red candle, is the day that stuck its tail down the lowest. Right. Yeah, Michelle Arturo. This is familiar to. You right so. There's our low day and then. A, trader, might subsequently. Look for a closing, price, above, the highest point of that low day so, if we look at that again and maybe, we need to zoom in here a little bit. All. Right let's zoom in right there so here's. Our lowest day right there. Let's. Maybe draw a, circle. Around again that again there's. The highest point of that low day and so. If a trader is looking for confirmation. That prices, have stopped going down and maybe they're starting going back up again they look for a closing price above, the high of that low day that's it. Now. You'll notice in, the four days since then did this day close, below or, did it close above that high nope. Did. This day close above that high nope, did this day close above that high nope how about this one nope. So. We don't have an entry signal yet, however. There. Is a tool that sometimes, employed by technicians, in. Anticipation. Of a bounce. Because. There. It tends to be, there's. An Asst there's, a, an.
Observed. Proportionality. To flags, and. What. What a what, a price. Pattern is and this includes Flags bull Flags bear flags but. What price patterns our observations. About the way stock. Prices have historically, behaved, in. The hopes that those that. That, we might identify. Common. Behavioral. Patterns that, might give us some insights into how a stock is likely to behave in the future and. There's. Been. Observing. Made, regarding. The proportions. Of a, flag when, you see a stock that runs up in this case, $16. Let's. Go from that low to that high about. 16, bucks, right. Up here a trader might ask themselves a question. Okay. What's. The question a question is how, far down is the stock likely, to fall. Before. It finds a bottom and starts, to resume that upward trend or in other words how, big is that flag likely, be in proportion, to the flagpole, does. Anybody have, any insights, into that have you ever heard anything about that. Well. Here's what a technician might do sometimes. They will measure the total length of the flagpole so, measuring from a low up. To the high and, then. An assumption may be that, as profits, are taken they can carry the price down between. One-third, and one-half that, distance. All. Right so in this case if, we hit a peak up here around one. Hundred and thirty dollars after, racing. Up sixteen bucks and we're expecting a, one-third. To one-half retracement. That is one-third to one-half of sixteen. Dollars, how, far down what might we expect the stock to fall from. One hundred thirty dollars well a third. Of sixteen dollars is about five bucks not, exactly this close it's actually five dollars thirty-three cents but we'll call it five dollars and half. Of sixteen bucks is eight, dollars so, a technician, might look at this and they might do some, quick math in their head they say okay so the stock peaked at one thirty a. One-third. Retracement, would take us down to about 125. Isch, a one-half, retracement, would take us down to about, 122. So. Somewhere, between that. Range, might. Be where a technician, thinks all right the, selling, should stall out is it a guarantee that's going to nope it's definitely not a guarantee this, is assumption, about something that hasn't happened yet on wallstreet you, ever been wrong about something yes okay, but in. Any case this. May establish a range, between. 125, and. 122. And that, may, represent a, potential, buy area, for. The. Sock does. That make sense, all right see Diane yeah, I'll Keith you're, getting there right so we just did some longhand. Math. Here, right now, what Keith is doing is saying boy wouldn't it be nice if we, could just have a tool, that would measure this for us and yeah there actually is a tool that, applies this logic, and it's called a Fibonacci. Actually. It's called Fibonacci sometimes, called Fibonacci retracements. Or Fibonacci lines there. Are other types, other stripes, of Fibonacci's, that we're not going to be getting into arcs. And fans and stuff like that now we're gonna be using Fibonacci, retracements. They're one of the tools that are found down, here under your tool icon, or you can find the tools up here, under. Drawings. Or you can right click on your chart and find the tools but I'm gonna be using the. Tools down here I'm gonna click on that and then. I'm gonna go up to the icon, that, looks like a percentage, see. That Fibonacci, retracements. I'm, gonna click on this and. I'm. Gonna go up to the top of our, upmove and I'm gonna piss position my cursor right up there at the very top of the very top candle you.
See How we, have these crosshairs and I'm positioning, the horizontal, crosshairs, right at, the top of that top candle okay. And then. I'm going to click. Once. And then I'm, gonna reposition. Down. Here. At the bottom, of, that. Lowest, candle, there, we go, and. I'm gonna click again what, this does is it essentially draws a flagpole for, us and then. Also applies, some, percentages. Now. We said, we. Might be looking for between 125, and 122. This. Fibonacci, is using. Some similar, math ID not identical, to what we just did but pretty close to. Draw. Some other lines it did actually draw exactly, a 50%, retracement, it. Also drew, a retracement, of a. Little bit over, 38%. 38.2%. Was, the retracement to this point, so. Now I'm not gonna go too far into how. A Fibonacci, is, constructed. But just to give you a quick feel for it this is built on what's known as the fibonacci sequence, okay. The. Fibonacci sequence it's. A it's a concept. From the field of mathematics and it starts with the number 1 and, it adds a 1 and another, one to it so 1 plus 1 what, does that equal to and then. From there you, just take the last two numbers in the sequence add them, together to, create another number, ok it's, 1 plus 1 is 2 1. Plus 2 is 3 2. Plus 3 is 5 3. Plus 5 is 8 5, plus 8 is 11 and, so. On not 13 part of me so. On and on the sequence, goes so. That creates. The foundation, for the sequence and the significance, of the sequence has a number of applications, in math in. Nature. Biology. Science. In. Trading. What. Some traders have noticed is boy. When a stock runs up sometimes, it follows, these, a sort. Of a Fibonacci sequence and it, might be explained in this way well if a stock rallies, that gets a lot of people excited but. After we run out far enough maybe, some people take some profits right. Some traders might take off some profits now, as profits. Are taken does. That conceptually, erase, whatever that good news was not really, maybe they're just taking profits, some portion, of traders. Taking, some portion of their profits, off the table well what, portion. Well. Maybe somewhere between 1/3, and 1/2 or in Fibonacci, terms around, the 61 point 8 down to the 50. So. The. Final, thing that a technician, might do here. Is, just. Wait for the stock to pull back the anticipated. Amount and. Then. Look for an entry and in this case that puts us down into, this range now, notice where we are right now we're. Just a shade below. That, level I think, it is interesting though that since, we penetrated. Through that 50% area, look, where we've bottomed out just, at the next Fibonacci. So. We popped through one anticipated. Potential, support area but, the next one held, now. For. Some technicians. Getting, down below that 38.2. Is kind of that that would be an example of where alright this pattern did not work out. There's. Some wiggle room within the expectation. But, that might be going outside the, tolerances, of wiggle room all right but. This, may be a, useful. Tool when anticipating. How far a stock is likely to fall after a. Sharp, run-up and for, some traders, that that in itself is, enough. Reason to get in even. In the absence of, another technical. Entry signal like like. A keyhole entry, alright. So, let's look at some other examples of, this, all. Right, Coco. Says this is a great question Coco, very good question I want to address it Coco. Says kam when we use the K hold entry how, many days do we look back to find the load the quote unquote load a alright so with the with a bull flag it's. Very simply whichever day stuck it's a little tail down the farthest right now. At the time you would have you would have first been able to identify this on the. 11th. Of September. Because. The 11th of September 'slow did not go lower so here's the tenth we got down here on. The 11th it didn't get quite as low so you say okay well that day is not as low so the so the, the. 10th was. The low day that's this day right here. Now. From the day that we identify, the low day it, remains, the low day until, it's exceeded until, something gets even lower. In. The mean time for. A for, a K hold entry we're waiting for prices, to close above. The high of that low day and here we've been twiddling our thumbs for, four days now and we. Haven't, closed above it and we. Haven't gotten down to a new low. So. At. What point does this, do. We stop looking for the entry Coco, is that a fair way to rephrase. Your question. It's. Been four days we, still don't have the entry.
Yeah, A technician, that at some, point may shift their focus well, geez this is getting a little bit long in the tooth because. This is no longer looking. Like it's just you know like, a ricochet, effect typically. With a bounce if you drop a ball on the ground and. It falls just, imagine instead of a nice rubber ball you drop a beanbag it. Goes boom and it just stops. Well. After a while you quit waiting for it to bounce right, it. Has revealed a, hidden. Property, that, it's not ready to bounce well, if this is gone going if this has been going sideways for, a while, we're no longer looking for a bounce what, are we looking for for, a bullish entry with a sideways, behavior. In a stock. Not. Looking for a bounce we're looking for a, breakout. Right, yeah, now, there's not hard and fast rules here, it. It's. Not uncommon, I've seen this a number of times and this can all be personal, preference so just because I say it doesn't mean that this is you, know recorded, in Trading Canon somewhere but. Generally. Speaking doesn't. Necessarily have to be the next day or even the day after that third, day may a boy were starting to get a long time, into this fourth day fifth day, six day now. It's starting to look more like a consolidation. Which, requires a breakout, rather than a bounce. That. Makes sense that. Was a good question thank you for asking all, right well. Let's go look at some other examples now, again for a wk a trader, may already be in this trade even, though they don't have a k-hole simply. Because we got that pullback, the. Anticipated. Distance, now I have some other examples that I looked at all, I did was I brought up the S&P 500 I looked for stocks that. Where the ten-week. Is trading above the 40 week indicating. Bullish. Reversal has, happened at some point in the past and we. Still have bullish can. Conditions. As as. Defined. By the ten remaining above the 40 ok now. Within, those I looked, for stocks that, have it had an acceleration. Of price recently, so. Let's see if we can see some examples here how about good old. Apple. I say good old Apple because it's one it's a big company. Has a its.
Symbol As almost you know that old trick when people used to name their company like, their towing company would be like a AAA AAA, towing. Because. They wanted to be the first in that, in, the yellow pages pardon. Me that's what Apple symbol has always reminded me of. But. Apple. This is not the 10 week moving average remember we're now on a daily, chart so, don't mistake the, fact that the red is above the green here or, the red is below the green here as any, indication, of what's going on with the 10 week and the, 40 week we'd. Have to come here. Change. It back to the to, a weekly chart in this, case is the 10 above the 40, yup. Has. A as, a recent, reversal happened, well the stock was going down then. We got that crossover 10 above the 40 there, we go meats out of those conditions, so, now we'll switch it back to that daily chart. Now. Let's go back to our favourites no you know what I'm, gonna I. Was. Gonna do something I'm just decided I'm not gonna do it never mind let me switch this back to a 6-month daily chart and. Rather. Than repeating that process from here forward. Just. Understand. I've already checked each one of these and their tennis trading above their 40 on a weekly chart okay. So. Has Apple recently, had an acceleration. Of the. Upward trend yeah. Let's, zoom in on that period it, really started about somewhere around here you, can see the stock still coming down it kind of floated sideways, and then. Right about here, it, took off, so. It looks like our flagpole. Might, be right in this neighborhood all right there's our flagpole, pardon. My, unsteady. Drawing. Technique. But. There's our flagpole here's. A potential, flag. We. Pulled back gone. Down for about 48 hours, here's. Our load a have. We closed above the high of that load day yet, nope. Is it a bounce entry, in. The. Sense of a close above the high of the load a is. That a bounce, nope. Not, a bounce yet. This is a potential, anticipation. That, we're looking for, okay. So let's get out those Fibonacci tools and, let's get some practice with them again, so. We're. Gonna come down and switch our tool, get. The percentage icon we're. Gonna go right up to the top click. At the top of the up move, pull. It down to the bottom right there. There. We go so. There's our flagpole well, that's interesting where. Have we touched twice, over the last 48 hours. You. See that right there yesterday, dipped. The tail down between, that. Sixty, one point eight and the 50% Fibonacci. Today. Dipped. The body. That. Was today's open. Down. Into that range, so, as we're rising up out of that might. A trader already, be in on that, evidence, they. Certainly might be okay. That's Apple. Let's. Look at. How. About in EE. Okay. Here's another stock is there, a recent acceleration yeah, right about here and I'm just gonna use these drawing tools. These. Are drawing tools it should be familiar to all of you I'm going to draw, right from that peak, down. To that trough there's. A pretty good straight flagpole. A little, bit of a bend in the flag right there. But. Since then we've, been pulling back so, here's our flag. And. The question becomes maybe, this red day was that far enough. Let's. Right-click I'm. Just gonna clear up that drawing set. And. I'm, gonna use my Fibonacci, tool. And, how about for this one we're. Gonna work on completing, a, plan for this trade so. We're. Gonna draw from that high down. To the low and and. This, is pretty typical there's. Going to be some, discretion, applied, with. Where to draw the high and where to draw the low all. Right how. Many of you let me let me ask you that use. You've. Used both flags before, how. Many of you are saying Cameron no no I don't draw from that from the candle, high but. From the body of the candle, so. I draw from the top, of a of a candle, body and then, when we go down to the low instead.
Of Drawing to the to, the shadow. Low you, might just draw to the body low that actually, is an ongoing debate, and there there are pros and cons on both sides arguments, made on both sides, drawing. From from. Wick. To shadow. Gives. A larger. Flagpole, which. Gives. A deeper. Required. Pullback, and, may. Lead to a. Little. Bit it requires a little bit more patience, on the entry. Drawing. The drawing, from the body candle, to the body a candle, makes. A shorter flagpole, requires a shorter pullback maybe gets a little bit earlier entry, okay. Michelle there you go yeah Roy and Michelle. Are both saying huh maybe I use body okay. Am I saying that you're wrong nope because they're pros and cons to both of those. All. Right but, how. About what we've seen over this last week look. At this we've, four, times dipped, into this range I think. That's interesting because the stock is holding, above that 50% level, and the. Next, anticipated. Move might be a resumption, of that upward trend so, let's continue with the logic. Where. Might a trader say you, know what this isn't working let's say that we got in because because, the stock dipped down below sixty one point eight and fell into that sixty, one point eight to fifty percent range where. Might a technician say you. Know what this isn't working, well. Conceptually. If, the stock breaks not, necessarily, below the fifty but maybe below that 38.2. We're giving it one fib. 1 extra fib of. Tolerance. And it. May be just a percentage. Point a couple of bucks something like that below that fib, so, that gives that envelope. Of Tolerance, you know because stocks are volatile sometimes, they don't fall, right exactly, where we anticipate they, might so. That might be one reason to, get out but. Then what if the trade goes well, how. Does a bull, flag trader. Plan. Their. Their. Exit to take their profits. Well. A very common application of a bull flag is to measure the distance, of the flagpole and, tack. That on, to. The, entry. Okay. Now, a conservative, way to do that is actually to tack it on to the lowest point in that, flag I don't. Know if you've seen that, variation, on that concept, but, in this case how, far did we travel, so. We went from a low of 206, up to a high of about, 226. So this was a $20, move. So. What a technician might do is they might look at this load a and say, okay the lowest point there was 216. So. $20, on top of that is 236. And that becomes their price target. Or. If. This if the trade, fails maybe. It falls down below, to. Thirteen, point eight maybe add a dollar or two to that or subtract a dollar to that to, a dollar or two from that maybe. We have a stop down around to. 1280. Okay. So that starts. To create a more complete, plan, for, managing, a bull flag trade. Alright. So how about for this discussion, let's, do it let's say I'm, gonna draw in the lines here. Let's. Say we make a plan that. If the stock falls below. This. Other, Fibonacci. Then. We're gonna get out so that would have us around to 1280. For our example, okay. We're. Gonna place a sell signal or a sell order down there our. Target, is up here at 236, we don't can't even quite fit it on there let, me show you a little thing that you can do with your chart if, you come over here to the right column you can click in this right column, and drag it down see what that does it. Actually creates more space to the top side of that chart and can sometimes help you visualize those, trades a little bit more we're not quite there yet I need. A little bit more space still there, we go, so.
236. Is our rough target, notice, I'm using fairly, round numbers that's, just you can be more particular if you like in. Your practice trades but. I'm. Just gonna do some rounding to make the concepts, a little bit simpler there. We go there's our plan for this trade in, because. The stock is pulled back within our targeted, zone out. If it falls outside of, that drawing zone by too large of agreed that degree and out. Again if the stock rallies as anticipated. And goes up the length of a flagpole again, so. Let's go to, our trade tab let's. Put that in I just have to commit these things to memory to 1380. And you guys remember this if you would to 1380 and 236. Okay. So. I'm gonna go to my trade tab I'm. Gonna type in any e for. My symbol and then, I'm gonna come to the ask price and right click on that and we're, gonna put in a custom buy order with a no Co bracket, a no Co bracket, is, a buy order to get in to. Sell orders to get us out either a worst-case best-case okay. And. This. Is kind of compressed because my left column is so large I'm gonna hide the left column for just a moment, alright. So 100 shares is gonna be about $21,000, trade in, this. Account, how much money do we have. Yeah. $400,000. So that that would be about 5%. Obviously. How, much someone's willing to invest from is gonna vary from one tray the next let's just say five percents okay for us so, I'm gonna leave this is at 100. Shares. How. About markets, are open we. Could put this in just as a market price obviously. When you put in a market price you're exposing yourself to the risk might. Not get exactly what we were hoping for on the on the entry what might wind up paying a little bit more for it than we had hoped. That, can impact profit, potential it can also. Make. The loss, potential a little bit larger, when. You're using a stop and. Of course when we're using a stop it's not a guarantee, that will sell right directly at that price anyway. Okay. Our limit, order is going, to be our target in this case, correct. Me if I'm wrong I think we decided 236, as the. Entry is that right. We're. Gonna put that in as our limit order make. That good till cancelled, which means that that order will remain in effect either. Until. It's. Hit. And triggered or. Until. The stop is hit and triggered and that cancels our limit order or, the. Order expires, after, six months, all.
Right Now here's our stop and again. Correct me if I'm wrong but I think we said 213 80, that's. Gonna be our stop we'll, make that one good till cancelled and that's. Our trade so, we're buying the stock right now, we. Have a target, of 236, we've entered that as a limit order because a sell, limit order, means sell at this price or better in, other words this price or higher the price gets up to 236. That's. The minimum that we're willing to accept on that. Side of the osceola bracket the. Two 1380, stop, if, the price falls down to that level it fires off a market, order so whether we actually get to 13 80 or not on the actual execution. The. Trigger is 213, 80, so. Then I'd click confirm and send this, gives us one last opportunity. To. Make sure this is really what we want to do buying, 100 shares of neee. Selling. At our target or selling at our stop, there's. Our transaction. Fees I should. Say selling at or around our stop because we don't know exactly. It's. About a twenty two thousand dollar trade we already calculated. That that's. It we just send this off I'm not going to do this this is John's class so I'm not gonna impose that on him but. We have accomplished, everything that we set out to do we. Wanted to accomplish three, things discuss. A potential reversal using, a 1040 crossover, and we did that got acquainted with with. Golden. Crosses and death crosses. We. Then talked about how a trader might anticipate, a bounce in a bull flag pattern, and then. Finally we got some application, with some current examples, obviously. Through all of this what I want you to walk away with the primary, item is how, might a trader using a bull flag, anticipate. A bounce is there a different entry. That's it, alright. Everybody thanks. For joining me today it's been my pleasure to, fill in for John anytime I get this opportunity of course I'm going to jump on it. He'll, be back next, week. As a matter of fact he'll, be back later, this week but look, for him in in, this presentation, next week if you'd like to join if you want to put it in your calendar two, o'clock Eastern on Mondays. Is when to join if you would like to follow me on Twitter there's my handle at sea May underscore. T Dao really liked that platform. Try, to tweet something every day of the week if I can sometimes, on the weekends, but. I try to give you some market. Insights try, to provide some, observations. But also some personal stuff, I like that that's fun too. For example, I think, a lot of you know my. Oldest is getting married on Friday so I'm not going to be here for my webcasts on Friday it's a big it's a big day for us. Adding. A fantastic, new member to the family, everybody. Thanks. For joining me. We. Do have more. Education coming. Up up. Next is a discussion, of covered. Calls and cash secured, puts for the so for those of you are trading options and more. Specifically, using. Them for hedging or for income. That might be an interesting discussion, that'll be starting in just about 20 minutes. But. As for now time for me to set you lose time for you to go get some practice. With this if you haven't done this before maybe, go to your to, your trading account to you to your paper money account look. Through some stocks and see if you can find somewhere the ten, is above the forty on a weekly chart that ten day then, that the ten weekly, moving, average above. The forty weekly. Look. For a bull flag pattern, and then. See measure. That with a fib see, what happens after, it falls down into that one, third to one half retracement. I think it might be interesting. Anthony. Says well this class be archived the vast majority of our classes are archived, this one is scheduled, to be archived every once in a while there can be a technical, glitch that prevents an archive I don't, anticipate that being the case here but I always have to throw that out as a caveat otherwise yes it should be. All. Right so let me see if I missed any questions I think we're good. Keith, says I see the support at 61, and, fall. Below 50% for the stop is that too tight Keith there can be variations. Right now there, are pros and cons to using a tighter stop earlier. Exit might save some pain might.
Also Lead to more whipsaw events so that would be something to practice in, paper-money very. Good question ask yourself, those course--and sorts of questions and pursue the answers, alright, everybody. Thanks for joining me. Remember. That risks are real we use real examples, in today's discussion it's not a recommendation or endorsement of those securities, or those strategies, and, I'll. Just give it imitation, again follow me on Twitter join, me in my other sessions, that are scheduled throughout the week but, hey whenever I see you again until that moment arrives I want to wish you the very best of luck happy investing bye bye. You.
2019-09-20 21:45
