Since the type of technical analysis I apply to the markets tends to be a bit unusual, as compared with others, I wanted to update some of my recent charts to give you a better idea how some trades start to unfold after the analysis is done. No methodology is 100% accurate, and there will always be losers along with the winners. But if you have a good method along with good money management, you should end up ahead of the game.
Let's start with a review of my Netflix (NFLX) setup, which was posted early March. We looked at the buy side in this stock against some pretty specific Fibonacci price parameters between $99.72 and $102.54. A low was made at $102.53, directly into this price cluster zone, as illustrated on the daily chart below.
The initial rally from this support decision was $20.95. I used a trailing stop on this trade, and was stopped out about a week ago. If the price continues to hold above the March 7 low, however, the upside target in the bigger picture remains at the $141.83 area. This is why I am looking at this current pullback for another opportunity on the buy side. Current support comes in between $107.01 and $110.53. If the price continues to hold above that zone, I'll look at some calls or call spreads and watch for Netflix to head toward the key daily targets above. Also, if the $107.01 support is taken out, I'll also back off the buy side and consider the trade a bust. (Always define your risk before you enter a trade!)
In a prior article on McDonald's (MCD), we were watching for a buy trigger against a very important price cluster of support in this stock at the $94.39-to-$95.69 area. The actual low was made at $95.13 on March 23, which was followed with a buy trigger against the zone. So far, McDonald's has rallied to $99.41. If the price continues to hold above the March 23 low, the two initial upside targets I'm seeking come between $104.15 and $106.60. At this point, I would be using a breakeven stop or better.
In my March 30 article on U.S. Oil (USO), we looked at both Fibonacci time and price parameters that suggested a possible tradable low, and we were watching for our buy triggers to fire off to suggest an entry. We did see a buy trigger fire off in Monday's session on a 30-minute chart: The ETF continued to hold above the low made on March 29 that was directly within the price support cluster identified as $38.29 to $39.02 area.
Now what? Initial stops on any bullish options strategies were placed below the March 29 low, which was the low made prior to the trigger firing off. If a rally is to continue in USO, I ideally want to see it hold above key support at $39.35 to $39.39, which is my current intraday support decision. If USO continued to hold above the March 29 low, the upside target for a continued rally would be $43.23. Still, the fund does have a couple of major hurdles on the way up (illustrated on the chart) that need to be watched. If the March 29 low is taken out instead, we will exit the long side.
Sina was a setup discussed on March 28. In this case, Sina (SINA) had already triggered on the buy side against a key price cluster zone. On April 2, this setup was stopped out -- the stock took out both the prior swing low, and the support cluster on which we were basing the buy decision. There is now a new support decision below the current price that comes in at $57.71 to $60.90.
The good news is that the losses will typically be much smaller than the winners. Make sure you have a good trading plan and the discipline needed to execute it, and you'll be able to survive the days that the market don't quite go your way!
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