DE Trade Set Up Idea

Today we have some decent market gains, they aren't yet what I hope to see and expect to see, but the point is I'm not talking about chasing trades today, the trades for this move were set up last week. If the situation allows for decent trades to still be set up for trend 1, then we'd of course take advantage of that, but not chasing, there's too much risk for diminishing returns.

However, I did look at DE for another member and found it so interesting that I thought I'd share it with you. This is a trade that can take advantage of a quick move higher in the market and give you a great entry, lower risk and higher probabilities, so this is one you want to put on your radar and if it goes according to plan, which I think it will, it will be a set up for the next tradable move (trend 2, down).

 There are 3 possible levels that we want to watch as entry levels for DE, the 3 are shown with trendlines, obviously the higher the better, but the less likely we get that move as well.

 This is the first level, we should be able to get a move through this, it's a clear resistance area in a Dow-30 stock, it's seen by a lot of traders, therefore it sets up a perfect head fake move/bull trap. Where do you think all the Buy to Cover stops are? Where do you think retail longs would rush in to DE? Yep, right above that trendline/resistance.

We just need to simply confirm distribution and make sure it's not going to try to make a run to one of the higher target levels.

 The daily Money Stream chart shows 2009 accumulation, nearly perfect confirmation until 2012 which has been getting progressively worse on the negative divergence/distribution side.

 The 3C daily chart in a leading negative divergence and especially tight in this target area. When we see these kinds of signals before a breakout / head fake move, we almost know for sure that the trade will work, BIDU was one of the best examples of this in Q1 of 2012.


 The long term 15 min chart should be an obvious divergence.

 Close up of the same 15 min chart and we have recent distribution, but we are looking for a breakout on the upside. What the above charts have done is tell us that an upside breakout is A VERY HIGH PROBABILITY HEAD FAKE MOVE.

Here the 5 min chart gives us the positive divergence we need for a head fake move/upside move to commence. The fact it is 5 min only helps our case as it is not a large positive divergence so DE is shaping up to be one of the more interesting short prospects that may be available this week.