Hi Friends,Further to my post above, sharing a method to trade...

Hi Friends,

Further to my post above, sharing a method to trade some instruments, I thought I'd share another approach that I use to trade shares which is quite reliable and profitable. Please remember that you also need good Money Management an Discipline. I alluded to this approach is another earlier post.

The 50% Retracement

I'm attaching 3 charts to enable you to follow my methodology a bit more easily.

The main scheme of this approach is as follows:

- we find a stock that has moved up quite noticeably in the recent past, e.g. last 12 months. This can be a small, medium or large cap.

- the stock moved up to a point where it gave a signal that a pullback was due. This is often found in the RSI Divergence, where the RSI made a High and the price kept going up and the reading on the RSI was considerable lower than the previous reading. It is also common to find that the price movement gives clues that it is on the way down, e.g. a very Bearish candle.

- reasons for this can be found in the FOMO (following the usual pump and dump from our friends in another forum) and then these smarties getting out and leaving the late commers to hold loosing positions.

- we wait for the price to retrace to a least 50% from the previous High. Then we monitor the price behaviour for signs that it wants to go up again and we enter the trade.

- in terms of Targets, we can use two approaches:

1- the Fib Extension, where you place the cursor of the Fib on the lowest price of the retracement and go to the Left and place the High of the Fib on the very top of the High. The projection is the 161.8% Fib.

2- we can use another approach which is - we take the top of the High and subtract the lowest of the retracement and then add this figure to the top of the high. The Z1P - chart 2 shows this quite clearly. Both approaches are reliable.

- so you're looking for around 100% profit (as a minimum) if you just Target the previous High and at this point you could sell half your positions to cover your entry costs and ride the other half for free. If you did this, I'd sell the reminder at the Target zones. Or you could just ride the price and sell at the Target zones.


Z1P - Chart 1

As you can the price made a High and there was a RSI Divergence and then retraced at least 50% from the High.

Now we need to wait for signals that the price wants to go up again.

I think it is showing signals of this as the price is consolidating around the 200 MA, forming a basing or consolidation.

Please click on the charts to expand them and make it easier to read.




Chart 2 showing the Projections for the Price




IOU - please refer to the chart and the comments.

No stong signs yet for an uptrend resumption, so you need to be patient. But you could take a 'punt' if you're game. If you were interested in this stock, you'd know that there are impending news due before the end of January and, if they're as expected, the price will move up and quite strongly.

But just looking at the price structure you can see some consolidation taking place right now.


In the siprit of disclosure, I hold both stocks.

Cheers,

soccer