Digging Into Dillard's

 | Feb 13, 2012 | 10:00 AM EST  | Comments
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Stock quotes in this article:

dds

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PMR

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PEZ

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PEZ

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When a see a market shift patterns from bearish to bullish, I always look at the next pullback for a possible buy entry. This is what I recently saw in the stock of Dillard's (DDS), a modest component of several ETFs, including PowerShares Dynamic Retail (PMR), at 2.21% of holdings, and PowerShares Dynamic Consumer Discretionary Sector (PEZ), at 1.11%. Since the November 2011 highs, Dillard's has gone from a pattern of lower lows and lower highs to a break of that pattern -- by taking out the Dec. 27 swing high.

At that point, I set up a pullback play by running the retracements back to the Jan. 5 low, along with the 100% projection of the prior $3.74 decline of the Dec. 27 high to the Jan. 5 low. Note that the decline into the Feb 1 low -- $3.63 -- was very similar. I call this similarity "symmetry," and the entry area on which I will typically focus is where the 100% "symmetry" projection overlaps one of the retracements. I prefer to see the 0.618 or 0.786 Fibonacci retracement overlap.

Dillard's (DDS) -- Daily
Source: Dynamic Trader

Once Dillard's pulled back into this general area, I looked at my intraday charts for reversal indications against the support, looking for signs that placing a bet on this pullback had some merit. The initial risk on the trade setup was to just below the Jan. 5 low at $42.54.

I actually saw two buy triggers on a 30-minute chart. You would have taken a little heat on the first one (as I did), whereas the second one took the stock up $7.05 from the Feb. 1 low made into the pullback zone. I've included an example of a trigger chart for educational purposes.

Dillard's (DDS) -- 30-Minute
Source: Dynamic Trader

So that was the past, but what about now? My daily chart shows upside potential to the $60.04 area, and we've been seeing a nice pullback since the Feb. 8 high. If this stock pulls back into the $46.39-to-$47.23 area in the next few sessions, I will once again look for a buy trigger with the $60.04 target in mind. For myself, that is the more ideal entry.

Dillard's (DDS) -- Daily
Source: Dynamic Trader

If you don't need to be as precise, you can also take any new buy triggers on a 15- or 30-minute chart and then define your initial risk below the prior Feb. 1 swing low at 43.70. If that level is violated, I will exit any long positions and wait for the next setup.

For more information on trigger entries please see this prior informational piece (accessible only to subscribers of ETF Profits).

When a see a market shift patterns from bearish to bullish, I always look at the next pullback for a possible buy entry. This is what I recently saw in the stock of Dillard's (DDS), a modest component of several ETFs, including PowerShares Dynamic Retail (PMR), at 2.21% of holdings, and PowerShares Dynamic Consumer Discretionary Sector (PEZ), at 1.11%. Since the November 2011 highs, Dillard's has gone from a pattern of lower lows and lower highs to a break of that pattern -- by taking out the Dec. 27 swing high.

 

At that point, I set up a pullback play by running the retracements back to the Jan. 5 low, along with the 100% projection of the prior $3.74 decline of the Dec. 27 high to the Jan. 5 low. Note that the decline into the Feb 1 low -- $3.63 -- was very similar. I call this similarity "symmetry," and the entry area on which I will typically focus is where the 100% "symmetry" projection overlaps one of the retracements. I prefer to see the 0.618 or 0.786 Fibonacci retracement overlap.

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