This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I traded a setup in Amazon.com, Inc. (NASDAQ: AMZN) today, and I already posted about my mistakes. I wanted to post an example of the type of setup that I should have taken. It’s similar to the AMZN setup I traded, but there are subtle differences.
Skyb0x on Wallstreak caught 6+ points in MasterCard Incorporated (NYSE: MA) today, so I looked at the setup that was present this morning. This is what I saw:
There was a big move upward, and price retraced less than 38% of the distance from the morning high to the open. It consolidated with support from the 5-EMA on lower volume. From there, it broke out again on high volume, reaching the 38% extension and beyond(!). No way would I still be holding now, but what a run! And it’s a perfect example of the setup I was looking for.
Here’s my flawed AMZN setup for comparison:
Similar, but see the difference? There was a big move upward, and price retraced more than 38% of the distance from the morning high to the open. It broke support from the 5-EMA on lower (but still above average) volume. It was a deep retrace, and the 5-EMA being broken indicated that trend was unclear, rather than a consolidation for further uptrend. I shouldn’t have taken this setup in the first place.
I never really formally thought these things through ’till now, so I’m writing them down here. I’ll look for the elements in MA (38% or less retrace, 5-EMA support) in my setups in the future. Thanks to Skyb0x and the Wallstreakers for bringing MA to my attention!
All right, somebody else can have MtM now for a while.;)
Pros,
Did the same with AA: it retraced to the .62 OR reversed and I bot at the .38(45.48), then stopped out. AMZN had momo action for 30 min, then deep retracement. The rally was over. MA had 15 min and shallow retracement. Thanks for the share. Much to remember!