ISRG Short Trade Follow Up

This was an idea from July 7th  (please review the post)

 Here was the setup in ISRG, the all too common False breakout in the yellow box.

 The first candle with an orange arrow broke the back of the uptrend, even though the trade was showing earlier signs via the false breakout. Today was the first noise candle in the current swing move down, a close with a low higher then the orange line (which is the high of our swing signal candle) would end the swing downtrend. Even if that were to happen, ISRG still has potential as a short position. As you know, it's very common for the first breakdown to see a bounce or a kiss goodbye, whether that be to a resistance line, a channel, a moving average, etc. I do have some cause for concern in which I think some choices or adjustments need to be considered.

 Here is the stop we were using which has so far held as there has been no close above the lowest point of the upper Trend Channel, however, I think this has a good chance of stopping out.

 The 30 min 3C chart is cause for some alarm. In red you can see where the false breakout occurred, 3C was in a negative divergence as ISRG made the breakout, showing us that it was almost certainly a false breakout. However now on the 30 min, there's a positive divergence forming at the white arrow, it should be taken seriously.

 The 10 min chart is confirming the findings of the 30 min chart.

 The 5 min chart goes back to the false breakout with a negative divergence at the breakout (first red arrow to the left. There has been another negative divergence on the 7/8 bounce and currently another relative positive divergence at the white arrows. The fact that there are 3 charts all showing a positive divergence makes me take this more seriously.

 Today also formed a Harami Candlestick reversal pattern (the Japanese call this pattern, "mother with baby"), in western vernacular we would call this an inside day and hints at an upside reversal.

 If you want to give the trade more room, the 3-day Trend Channel has held 3 trends, as you can see.

If you want to use this stop, the level would be on a close at $374, this would leave you with a slight loss on the trade as the entry was at $369.77. 


The other options would be to keep using the hourly trend channel and just stop out, although in this case I would consider at least a partial stop out on an intraday breach of the channel, rather then the closing basis. You could also use the swing trade identification method.

You could also use the 10-day moving average as with any new trend, the first pullback tends to be to the 10-day moving average. You might add 1% or so above the 10-day as a stop, you can always check with me to see what 3C looks like. The advantage of the 10-day sma would be the stop out level would be close to $367 which would keep the trade near break-even or a small gain.


In any case, I would view any bounce as a second chance shorting opportunity, if this comes to pass, we'll take another look in the area.