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Written and copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved.
EWA: Exit time for down under.
I am writing this on late Monday evening, and I have an order to sell this at tomorrow's opening. I last reported on this exchange traded fund back on
April 22, which I wrote and posted the day before (4/21). The lower chart is from that blog entry and you can compare the two
to see how price progressed.
After thinking about it, I decided to buy the fund. I placed a buy stop at 28.45 which filled on April 23 at a price of 28.42. I placed the buy order at 28.45 because
I wanted to be sure that price cleared the highest high in the head-and-shoulders bottom chart pattern. In this case, that was the left armpit high
at 28.34.
EWA: Stop Placement
I placed a stop loss order at 26.07, below the right shoulder low (RS) and below the volatility stop of 27.04.
I did not use the
volatility stop because the fund gapped a lot and I felt it was more volatile than the number suggested (which does not make a lot of sense unless you believe that volatility
has increased more in the last few days since a vol stop uses 22 trading days of data).
The upside target was 29 (the site of a knot of congestion in December 2007 -- circled) on the chart to the right, with round number resistance at 30, and near the site
of the old high in July 2007. I marked the high as point A (top chart),
which peaks at 30.40. The recent high (today, Monday), is at 30.54. The mirror between these two is unmistakable, and mirrors are something I have focused on in some of my
blog postings.
My guess is that price will begin to correct (move lower) because of that overhead resistance. I could be wrong, but the little
profit I have in this trade (just over 6%), I want to keep. I also looked at 32 as being another source of resistance, so that is yet to come.
EWA: Notebook
In my notebook, I wrote, "Buy reason: head-and-shoulders bottom with an upward breakout that pierced a down sloping trendline
from the Oct 31 peak (arith scale). Price confirmed head-and-shoulders bottom with close above neckline. The only problem I see is that once price gaps upward, it almost always retraces the gain, dropping."
The last sentence was an interesting one and it rang true for this buy. The ETF dropped for several days after I bought but then recovered and moved up in a near straight-line
run over the last week or two.
As price climbed, I moved the stop up. Here is my notebook entry for the stop placement.
- 4/24/08 Stop placed at 26.97, below the 62% fib retrace, below the minor low at 4/18/08 and below the vol stop of 27.42.
- 5/7/08 Stop raised to 27.33, slightly below the vol stop setting.
- 5/12/08 Stop raised to 27.97, slightly below the vol stop setting.
- 5/14/08 Stop raised to 28.63, vol stop.
- 5/17/08 Stop raised to vol stop, 29.33.
- 5/19/08 I decided to sell this stock because it's at the level of the July '07 peak and it looks to be pausing at 30. Round number with mirrors. Time to exit.
I hope price gaps open higher...
EWA: Aftermath
As the chart shows, the timing of this one was just about perfect. I sold the day after price peaked. Since then, it has been a near straight-line drop.
In the figure, the bought and sold lines do not point to the prices at which the transactions occurred, rather to the days when they occurred.
I bought at 28.42 and sold at 29.97 for net gain of 5% in a month.
-- Thomas Bulkowski
Copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved. Texas virus: Makes sure that it's bigger than any other file.
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