This Is One Way To Detect Reversals
Last night, I talked
about F5 Networks (FFIV) as a potential short. The daily chart below
is as of yesterday’s close. As you can see, the stock failed to take out the
February 15 high and formed bearish tails two consecutive days. Also, it’s not
so drastic, but the MACD histogram is indicating a negative divergence. I have
planned to short FFIV if it slips below 54.73.
Now, let’s look at the 5-minute chart from today’s session. FFIV gapped down at
the open, and it immediately traded below 54.73. Therefore my short was
triggered. I want you to pay attention to the 9:45 bar. It is a bullish hammer.
Notice the 5-period RSI was giving a strong positive divergence. It was the
first warning to get out this trade. Eventually FFIV re-crossed above 54.73 and
proceeded to break above the gap zone.
You don’t have to wait till your stop loss triggers. Use short time frame charts
to detect reversals.
T.Kamada
Feel free to mail me your
questions.