This daily linear regression channel shows the trend in BAC that has been down for 7 months now, we sometimes miss the importance of a tend just watching the daily gyrations, but this is a profitable trend that could be added to as short selling of equities (vs buying inverse bear ETFs) allows us to pyramid the position, where as a traditional long must be sold to utuilize the gains-not so with a short.
The white boxes are low risk, higher probability entries. I still prefer to phase into a position at one of these points and add the rest on a new low in the trend with all of the volatility in the market and considering the majority of this trade has been countertrend. You'll want to watch that MACD positive divergence in the future.
Here's my Trend Channel for objective stops which covered 3 trend trades, the first a short from the $35 area to sub $10, the second a long from the sub $10 area to $15 and the current short side trade from $20-ish to $11.64 with a current stop at $12.76. As I showed the last week or so, we had a good opportunity to get in toward the top of the channel (lower risk). In all 3 of these trends, the channel did not produce one false stop out signal.
2 comments:
Does 3C forecast anything positive inaddition to the MACD?
Mislav to answer your question, first let me go back to the premise of the trade:
"The premise of the BAC trade, and other financials may be worth checking out as I will be doing, (JPM was also a featured possible short position with its run up to the resistance zone of its trading range, thus offering a lower risk entry) is entirely based on the risk:reward ratio. If you can enter BAC, as some of you may have done last week when it ran up to the top of the Trend Channel near the stop out point, you are entering an established downtrend and doing so at a fairly low risk area. This is why I like to enter part of a position shorting on strength and add the rest when it confirms its weakness and works in your favor.
http://wolfonwallstreet.blogspot.com/2010/11/nightly-wrap.html#links"
Now, the 5 and 10 min show what may be a bounce coming, the 1 min is slightly positive. 15/30 min are 30-60 min look negative, but there was that "most likely" false breakout in the financials at the start of November. I think the confusion over the HR 3808 bill being law or not is causing vacillation in financials, that' why the premise of the trade is largely based on risk management, entering at a bounce close to the stop out point. Also somewhat on the fundamentals as the banking sector could be in big trouble as the Fed is trying to determine through a second round of stress test. If the foreclosure thing becomes a big issue, it will hit WFC, BAC and JPM the hardest.
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