I was out most of the day, and when I finally got into “the office” I immediately spotted a box play setting up in Rambus Inc (Nasdaq: RMBS). I didn’t take the trade, because I thought the target was at important-looking support, and it was the last hour of trading. I was right in as much as the target did not get hit. But, it did get over 2/3rds of the way there… what, am I above making 0.67R now? I should have just believed in it… especially since I still have not seen a box play with a decent setup lose.
I’m not going to go through what the numbers mean every time, unless there is something special about my thought process for the setup. Check out other examples of the box play if you are unfamiliar with it.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| RMBS |  |  |  |
February 9th, 2007 at 4:34 pm
It seems like none of these box plays that break out ever retrace 50% back into the box. Maybe that should be your stop point…
February 9th, 2007 at 4:53 pm
Sometimes they do, but it’s so far pretty immediate if they’re going to retrace. So, maybe a good way to play it would be to double your size and raise your stop if it’s acting strong right out of the gate.
In the chart patterns books I have, they suggest a stop below the lower boundary, for longs. But, they say if that’s too wide for you, then the second best place is just below the upper boundary. Implying that if it retraces at all, it often stops you out. Maybe that’s true… I haven’t catalogued enough of them to have an opinion.