RES Trade Set up (short)

This looks to be a fat juicy short setting up, we want to catch them before, not chase. Here's the idea behind the trade...

 This is RES on a daily chart, I believe this could be an excellent trending trade, therefore it is worthwhile to be patient and let the trade come to you. It is also much easier to understand the trade when you remove the noise to reveal the trends by using a 5 day chart. I might even make my risk management, entry, trade management and exit plans based on a 5 day chart, we can't usually do that, but with a trending trade we can and it probably is the most effective way to view RES as to not get caught in emotional decisions.

 A look at a 5-day chart makes the top much more obvious, it also reveals the 4 trend stages and makes them more obvious. As you can see, RSI has gone negatively divergence in to the top (stage 3) and the recent volume spike has come on a break below the top's support level. What do we know about tops? We know that most traders believe that once a top loses support, it's time to short. Wall Street has used that century old idea against traders to shake them out, we know that after a serious break of support, we tend to get volatile shakeouts back above former support (now resistance) and it knocks traders out of their shorts. These are short term manipulations by Wall Street, but they can't change the larger picture of a stock that is clearly topped out and almost ready for stage 4 decline (where we are likely to find the trend and easy money).

 Stochastics is an oscillator so it is best used in a range bound market, you could call a top a range bound market, just extremely volatile, so once again on a 5-day chart, the negative divergence in stochastics becomes crystal clear.

 Using my X-over screen to prevent false crossover signals on a 5-day chart, we see a clear sell/short signal has developed. We also see that the volatility in the stock usually takes counter trend moves up to the 22 bar (each bar is 5 days) moving average, and that's where we see the long upper wicks on price candles (resistance and higher prices being rejected). So now you have some idea of where a stop would need to be placed.

 I created an ATR indicator and you can see it trends well during the uptrend, however (5-day chart) during the top, we see extreme volatility that we would expect to se during a top and in some cases a bottom.

 The 5-day Trend Channel also has held the downtrend thus far, it also confirms that a counter trend move should be halted around $20, the same as we saw on the X-over layout. This means this we can ease/phase in to the trade in smaller pieces, but near the Trend Channel is likely where the bulk of the position should be initiated. Whether it can make it there will largely depend on the overall market tone.

 The 2 day 3C chart confirms the uptrend as it should, but goes negative at the top and is now leading negative, so we know smart money is already on the short side of the trade.

 A look at the hourly chart confirms distribution into the top.

 A closer look at the same chart even shows a false breakout to a new all-time high on a negative divergence.

 The 30 min chart has been in confirmation largely, except for a few divergences like the positive at the October lows which are also support right now.

 Here the 5 min 3C chart does a great job, but also shows what we would expect to see after a break down, short term accumulation in white as they get ready to shake out shorts on a move up, this is what we want, to short in to strength.

 A closer look at 2-3 days of accumulation, so it appears the move is set, but it's nowhere near enough accumulation to worry about this changing trend to a bullish stance, just enough to shakeout longs on a move probably close to $20.00

 The 1 min chart shows the same.

So here's support at the white trendline from October. The first area of interest is at $18, you could consider starting to phase in a short position there, but I wouldn't go to more then 25% of the intended position. Near $20 is where we will probably want to add the bulk of the position, maybe 50% (to bring it to 75% of the intended position). I personally would add the last 25% on a break below the October and recent lows.

After that, RES should be ready for a better trending environment.