Chart of the Day: 2/1/2012

[dc]C[/dc]ontinuing from this post, I thought it might be useful to show the initial outcome of the APOL Anti trade. As a refresher:

  • A: Overextension. (In this case 3 pushes and climax beyond the upper Keltner channel.)
  • B: Sharp countertrend momentum indicating that sentiment and control has shifted in the market.
  • B1: Note that this also takes the MACD to a significant new low, relative to its recent history.
  • C: Our actual entry was roughly here, on a breakdown of the previous day’s small bar.
  • D: The initial stop was established here. There are many ways to do this, but this area is my usual preference for the pattern.

We took first profits on this position in today’s trading, on a resting limit order .02 above the day’s low. There is probably more downside, but, at this point, we should have a small profit on the trade in all but the very worst case scenarios. This discipline of taking partial profits at predefined spots is one of the keys to consistency.



Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.