When A Reversal Takes Hold
Once a stock begins to reverse
after a sustained pullback, quite often you’ll find a second opportunity to hop
on board, not too far ‘up the road.’ Many
traders look for first pullback entries in strongly trending stocks. While the
stock that’s in the process of reversing is not ‘strongly trending’ yet, the
principle for second entries can be similar, as you’ll usually find some
consolidation work that confirms the earlier reversal pattern, allowing for
solid entries in the same direction.
With United Online
(
UNTD |
Quote |
Chart |
News |
PowerRating), our first
alert went out via the TM chat, I noticed that the stock was forming an intraday
consolidation on the 5-minute chart, but was being confirmed by the 30-minute
extended action as well. A confluence of EMAs were aligning themselves into
a ‘bow tie’ formation ( I happen to use an 8,20,60,260 combo, a la Haggerty)
on my intraday charts. You might use something slightly different, but I think
the important thing to remember is to keep it simple, and keep it consistent.
With the alignment setting up as the stock was approaching pattern resistance
levels, UNTD was fast becoming a potential trade opportunity. While the stock
was still in the pattern, I put out an informal alert within the chat, attaching
the 38 level as the key for entries.
….and voila. It’s nice when it all works out
for the reversal players in our chat. But, with the stock moving in ‘the right
or anticipated’ direction, it was also time to keep monitoring for more
potential setups, in the form of continuation plays.
12:48:24
Intraday
Setup Alert
United Online (UNTD)
has formed an ascending intraday triangle.
The stock was mentioned as a potential reversal long thru the 38 level within
TMs chat earlier in the session. Continuation entries above the current pattern
are set at 38.60, with current trade at 38.51, up 1.07.
I guess you could say ‘United we stand’, as today’s
trade in UNTD was beneficial for both the reversal and continuation players
out there.
Chris Tyler
ctyler@tradingmarkets.com