Guest Post: The Setup I Should Have Taken Today
Posted on July 12th, 2007
Written by Prospectus
Posted in: N/A (old archives)
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.;)
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