As of 12/08/2023
Indus: 36,248 +130.49 +0.4%
Trans: 15,211 -88.23 -0.6%
Utils: 874 -4.30 -0.5%
Nasdaq: 14,404 +63.98 +0.4%
S&P 500: 4,604 +18.78 +0.4%
|
YTD
+9.4%
+13.6%
-9.7%
+37.6%
+19.9%
|
 34,500 or 36,400 by 12/15/202314,500 or 15,800 by 12/15/2023 900 or 825 by 12/15/202313,700 or 14,450 by 12/15/20234,450 or 4,650 by 12/15/2023 |
As of 12/08/2023
Indus: 36,248 +130.49 +0.4%
Trans: 15,211 -88.23 -0.6%
Utils: 874 -4.30 -0.5%
Nasdaq: 14,404 +63.98 +0.4%
S&P 500: 4,604 +18.78 +0.4%
|
YTD
+9.4%
+13.6%
-9.7%
+37.6%
+19.9%
| |
|
34,500 or 36,400 by 12/15/202314,500 or 15,800 by 12/15/2023900 or 825 by 12/15/202313,700 or 14,450 by 12/15/20234,450 or 4,650 by 12/15/2023 | ||
My book,
Trading Basics
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Many of you will know to place a stop below a support zone, such as a minor low or region of tight horizontal price movement, but what do you do with the situation pictured in the chart (point B)? Where do you place the stop?
If you noticed the broadening top with a partial decline at A (which happens to rest on a 38% Fibonacci retrace of the move up from the January low) and bought in, stop placement was easy. You just placed it a few pennies below A.
Now that price has climbed to B, placing the stop below a support zone would be foolhardy. The nearest support zone is a small knot of congestion circled in green (if you look closely, you can see a closer one, just above the volatility stop line, but ignore it).
You can use a Fibonacci retracement of the AB move. To do that, take 38% (or 50% or 62% or whatever your favorite number is) of the difference between the two end points and subtract it from the top point: Stop Price = B - (38% x (B - A)). To plug in numbers, we have: 143.67 - (38% x (143.67 - 103.5) or 128.41. I show the approximate level on the chart as a blue line. That stop location (128.41) is well below (nearly 11%) the 143.67 close, so it is not the ideal case.
Another, and perhaps better, method is to use a volatility stop. My free Patternz program will calculate it for you. Refer to my volatility page for the calculation (it amounts to taking the average of a month's worth of high-low ranges, similar to an average true range). The idea behind the stop is to place it far enough away so you do not get stopped out on normal price volatility. I show the volatility stop as a red line.
When I place a stop, I always check the volatility stop setting before deciding where the stop should go. In a case where a straight-line run is occurring, such as in APA, a volatility stop can keep you in the trade longer than using other methods.
Similar to a volatility stop is a chandelier stop. Compute the average true range over the past month, multiply it by 3 and subtract it from the current high price. The result is the stop value. My volatility stop uses the high-low average instead of the ATR with a 2x multiplier but subtracts the result from the daily low.
-- Thomas Bulkowski
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