mrm - chart, page-23

Hi Johno,

As this is the ST trading thread, rather than the MRM thread, I figured I would join you with a post about how I would see it as a trade, rather than the funnymental value or whatever of MRM.

First chart is a 3 year view showing how I draw the LT pitchfork, which clearly shows why I agree with you that it has broken out upwards.



Second chart is a 6 month close-up, has volume bars in the background, and the 15,5,3 stoch and RSI(13,3) in the lower panes. The stoch and the RSI are elevated and pointing down, but I have circled in green the areas where they have stayed elevated for extended periods, which demonstrates that there is no technical reason why the could not do so again.

In the main pane I have circled in blue the gap as price crossed the U-MLH. As we all know, price loves to fill gaps, and in pitchfork theory, when price gaps a line there is a high probability that it will return to test whether the line has turned from resistance to support (or vice versa).

The green and red lines I have marked in are potential entry and stop lines, or short/cover lines.

If you were inclined long, one possible trade would be to enter on the green line, with a stop below one of the red lines, depending on your position size and risk tolerance. Another long trade would be to wait till price gets below the green line, then buy once it moves upward and breaches the green line, using the same stop strategy.

If you were short inclined, you could enter on a breach of the green, black or first red line, and pyramid on any subsequent red line breach, with a cover order at the green line if the breakout continued after a false breakdown. The red lines would also form obvious stop loss staging points once you had entered a short position.

Personally I am inclined to a long position purely because statistically, that is the better odds based on the pattern. As traders though, on a ST trading thread, we should be able to identify low risk, high reward, high probability trades, so I put in a 3rd chart, with a ST trading channel on it.



This chart has a green support line, below which you would think you would want to stop yourself out, and a red cap line which you would think might mark the limit of the trading range at some point.

I think you could comfortably project that channel to $3.50, and given that the size of the gap between the entry and first stop lines on the previous chart is around 10c, I reckon you could call this one a reward of 5 for a risk of 1, which would put it in my category of potentially high reward trades.