January 19, 2009

Successful Trade in the Planet Wealth Trading Room

By Planet Wealth

Another successful trade in the Trading Room this week. We found a high probability trade going against the overall trend and had a excellent return from it.

Let’s take a look at ways we can trade a stock safely in the opposite direction to the overall trend.

Currently SUN has been in a down trend for the last 18months (long term view). In the medium view we can see a down trend channel. All of which we do need to take into consideration for our small term trading. The most vital view is the 3 month view (small term). In the last 3 months the medium term channel has clearly been broken out of. This is the point where we can look at a long signal in a bearish stock.
(click on images to enlarge)

If we zoom in on the small term and do an in depth look, the odds are stacked in favour of the stock pushing higher. First there are now Higher Troughs (HT) coming off the bottom of the channel that has been used as support. Once SUN broke out of the channel it used the other side as support . The stock then pushed higher past the horizontal support to make at 2^nd HT outside the channel. Part of our entry was the Bullish Engulfing pattern that was formed with higher volume. It did take an extra day for the go to happen but as you can see the result was in the direction we expected.