This Is How To Find The Next Reversal
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One way to find a strong 1,2,3 candidate
is to start out with a canned list of stocks that are gapping either above or
below the prior evening’s closing price. From that initial list you’ll be
able to weed out those issues that look interesting based on daily chart
technical levels of support, or resistance. Then the most important step of the
trading equation comes into play, waiting for a proper entry to set up.
In Zimmer Holdings I actually alerted the chat
room of a potential TrapDoor entry early on, as the opening minutes of trade
were at levels of significant support based on daily pivot support. This classic
pattern never played itself out within the rules of proper pattern sequence. A
short while later though, with trade down significantly through our initial
support levels, a similar formation, with the ‘intent’ of an opening reversal
TrapDoor was establishing itself.
At 10:25, the case for entry could be made as ZMH
tested further daily supports. A long from these levels could use the
“pivot doji” bar as a potential stop loss, or possibly the slightly
lower session lows. If you didn’t find this entry attractive, a more well
defined 1,2,3 pattern developed off of these same levels about an hour later.
11:40:28
Intraday
Setup Alert
Zimmer (ZMH)
might be considered “holding” as a reversal candidate. Triggers
out of a 1,2,3
came in above 44 at 11:25 on divergent stochastics and intraday volume. The
stock is currently consolidating slightly above this level at 44.06, down 4.22,
after testing daily technical supports in the form of a 50% Fibonacci
retracement from the Year-To-Date Lows.
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Even though the market might be churning, if you
dig a little bit deeper into individual issues on the move in that day’s trade,
you might be able to scoop up, and “hold” onto a nice trade in a
session dominated by a whole lot of indecision.
Chris Tyler
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