Jeff,
Excellent idea. Good learning tool. We can decide what we would do and what others would also do based on the chart.
Realize there's not always a right or wrong but will you critique as to what you would do?

Great Example Jeff! This is a tricky situation.....

Where do you find these great examples by the way?

Jeff,

Great game ... I vote for one a month.

What a great post Jeff. Thanks!

I see the highs getting lower and the lows hanging out at 80 so 80 seems to be a strong support level or in this case resistance since the stock broke below this level and retraced.

The histogram is currently showing bearish momentum or (lack of momentum) which tells me that the support is just not there in order for the retracement to hold (bulls unable to obsorb all the shares being sold)

The Stochastic is showing us that the momentum is decreasing (The line is falling)

Its at a good entry point for me I would Short the stock or take down some puts.

I'd go short and see it as low risk since its sitting right at resistance.

Jeff,

I'll bite. I am ok with the trade because I know I can control my risk. I don't use oscillators (so I spit in your general direction for including them) but I love looking at volume so I feel a bit naked....although not like C2 with a shear speedo or DrDirt in his Cheetos stained speedos. My concern is that I am looking at a potential $5 move and if I include a 3% stop which equals $2.4, the risk is not worth the reward. I Think I just talked myself out of the trade....I do that a lot. It is tempting because $5 to the upside could put us into new highs, dopending on what you are not showing us. Either way, I would call Arty's Grandma first for some wisdom FFS.

So, when you say "short/put" you mean a "short OR a put," and you don't mean a "short put."

Right?

I hacked in and voted anyway ;)

I'd buy a put, and use a close above 80 as my exit. You don't get much better e/e than that.

My crayon would give it about 1.00 of risk and a target of at lease 74.00. Risk 1 to make 6 ... I would take the trade.

I would buy a put here. stop at 81 with first target at 74 and second target at 70. I would probably buy the put with April expiry

I would wait.

Jeff,
Yes I do but I can't see where the lows are or if this stock is in an significant uptrend or a downtrend. This stock looks familiar and if I find it, I will keep the secret like the British press did for Prince Harry!

I don't know if this is a good thing or a bad thing but when Jeremiah was talking about the histogram and stochastic I had to go back and check the chart. I don't use them so I didn't even notice that they were there. I zeroed in on support and resistance.

I second what SpartaChris says.

liz

lizandgrant

I just hope I understand them and didnt make a total ass of myself.

I'll take a swing at this. It's always fun!

First thing I notice is that the MACD and the STO haven't given a buy signal although it would appear the STO is in oversold territory but just barely.

Next thing I notice is the closing price. It appears to have closed not only above the $80 line but what appears to be a moving average. By the curvature of the moving average, might it be a 20 day MA?

I also noticed the gap upward from the close the previous day which may signal some strength I would assume.

From those three points, I don't think I'd take the trade until I see more confirmation. If and when it does confirm, I prefer setting my exit at the flat portion of the chart, or in this case $80. I'd let it run to $74 since that's the previous point of support.

Jeremiah-

We've all got to stick it out there sometimes... after all we're traders.

liz

I think this is a good E/E point. I would buy 2 May (if available) puts and target the previous Jan. lows, approx. $72.50. My exit would be $82.40 or leg out 1 contract when I reach the first target and let the other continue until signs of weakness; candlestick closing price above the high of the lowest low.

Jeff,
If I could repost, I have some new ideas. I would personally look at the RSI, CCI,and the Money Flow Index for some buy or sell signals. I would only buy if the McClellen Summation index agreed with the RSI and the CCI. Then, and only then, and only if the Accumulation bands had lined up with the Bollinger bands in harmony with the Accumulation Swing Index would I even consider speaking to Arty's Grandma for advice on the convergence of the Leo the Lion vs. Sagitarius equinox in the fourth moon. Wow, I just talked myself out of the trade again.

Sean M.,

Should I assume that you would plot all of these using Raimo's rainbow crayons? Either way, I'm looking for a better chart to trade tomorrow, because this one doesn't fit my rules.

Great exercise Jeff. You know there are websites that charge good money for this type of info you freely provide. With thousands of onlookers I am thinking you could be bringing in $50k per month for your information. You are truly awesome and I hope that one day I can shake your hand.

Short put. exit near end of day if closes above $80.

I think it's sitting dead in the middle of a symetrical triangle...I'd do nothing and look further without some additional information.

Where is the volume ?

Need volume for a decision

Hey Jeff,

I've been reading your blog for awhile now. I just want to give you kudos. I specially like your postings covering option education, you really know your material.

On to the subject at hand. Just from looking at the chart its a good short. I'd buy the front month 75 strike put. Depending on what sector this thing is, I might even go 70 one month out. I don't use MACD but stochastics does say it is slightly oversold. Exit on a close around ~ 82.

Well, I voted to go short..
Allthough in reality I would wait. Since this is an end of the day candle, I assume, I don't like that it closed at its high. I would like to see how it opened, I imagine it may peek over 80 and start retracing. The 3 reasons to go short are: the MA the Trend line and Level of resistance. The obvious exit above the trendline Risk/reward is decent, about 2-1. I do not use oscillators either, but market internals and volume..

Jeff,

You just caused an argument in our house.

Jeff,

This is truly a valuable exercise for a real world scenario. I appreciate your creativeness to post this.

Man this looks good. Could you give us the name of this puppy so I can buy puts on it at the open tomorrow.

Jeff

Question.

Chat Console yes? live chat right here fir the OA's?

How about a Netmeeting workshop featuring yourself and a live in depth demonstration of your watchlist, how it is managed, and how you pick stocks.

Could be very cool!

possible?

Kim,

Which side are you on? What's the reasoning?

JK - I would take this trade here to the downside, tight stop above the candle of 2 days ago (about $81?) with the first target at $75 and possible move to recent lows around $70.

I have to say thanks for all the recent education although I haven't been able to trade much lately. At least I'm not losing anything being in cash right now.

Jeff
I am long this stock currently, I entered this position today! I have traded this pattern before as mentioned in thomas bulkowski chart patterns book. I have a tight stop on todays close. FSLR rocks!

jason

I also have to say thank you for the recent posts like the 7 Habits post. I find that Habit #4 is the biggest problem for me. I guess I have to adjust my expectations, and figure out a better way to turn $1000 into a cool million...

I would not take this trade. Dan would. I don't think that it's a resistance bounce. I'd trade it off of the diagonal resistance but not off the horizontal. I don't see the horizontal at $80 as being strong enough. I don't see risk/reward working either. Below is a chart of what I'd like to see if I was trading something similar.

http://img508.imageshack.us/img508/9817/0312ub3.gif

I'm dying to know.....WWJD? I said short it. all in. going down. My Dad has a put on it currently. wrong move? had some good upside today. Not sure why. curiosity has me now!!!!!! Love the Post. Great Idea. I am gun shy getting into anything else due to losses incurred over the past few months. this helps with confidence if i am right. although if not i may need more classes. good thing chicago is next week!!!

Jason Wins!

Jason,
What is the pattern? I'm at a loss.

Jason,

You might get beanie-ized for giving it away! Bad boy...

Beanie-ized! HA!

Where's Tim when we need him? :-)

I think I missed all the fun. If it's not too late, I'll add my thoughts...

I see a tightening triangle forming and would not trade it either way until I see a clear breakout.

Before I figured out which stock this was I realized I had seen this before and marked it up. Going through several that I thought it might be (before I came up with the right one) I noticed how many stocks are trading in similar patterns right now. Spooky.

Great idea!!

Relative to great trading habits, I would add that you have to aware of overall economic condition. For example, we are in a very serious bear market and the trader must be VERY careful going long on any position at this time. IMO the charts/TA that worked in a more "normal" market may be worthless in this market. For example, the oversold conditions can remain for extended periods and upticks are much smaller while any possible bad news will absolutely kill all the stocks in a segment e.g. HMOs.

The only thing that works now is long Treasuries, gold, and EUROs. However, that can change in a heart beat if the Fed action next week moves to strengthen the US dollar. It just another aspect of trading to be aware of the big picture.

I'd wait until this breaks either way.

Doji - yes, I agree! RIMM is one example.

.

how about consolidation at higher highs in a down market
go long

betred

OA
pattern is a ascending broadening wedge,a picture of one is in 'GETTING STARTED IN CHART PATTERNS' BY bulkowski on page 103 figure 6.13
jason (beanieized)

Jason,
I found it on the pattern site, but I see the broadening formation reversed from what Jeff has. Is the pattern still valid? Am I missing the elephant in the room?