Powder Dry for Hess

 | Apr 22, 2013 | 9:00 AM EDT
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Using "trade triggers" and filters can keep you out of many trade setups that will never play out. While it won't keep you out of all losing trades, it will filter you out of quite a few doomed trades. For example, my recent setup zone in Stratasys (SSYS) got violated -- but there was no trigger for a swing trade. So it was basically no harm, no foul.

Hess (HES) -- Daily
Source: Dynamic Trader

But, for the Hess (HES) setup I'm still watching, the low end of the support has not been violated, as you can see on the daily chart above. So far, we have only seen the "aggressive" buy trigger on the 15-minute chart -- though if you use this kind of trigger, you'll tend to see more stop-outs. For such an entry in Hess, a stop can be placed either below the April 17 low at $65.67, or below the low end of the Fibonacci price cluster at the $65.34 level. ($0.20 to $0.50 below the zone is fine.)

Hess (HES) -- 30-Minute Chart
Source: Dynamic Trader

The 30-minute chart, on the other hand, has not yet seen a trigger fire off. Now, if this setup starts to play out, I suggest that you get to a breakeven stop when it makes sense to you, and that you then trail up a stop as the stock climbs. You should always do this, because these setups do not always make the trade targets, even though we do see them met often enough. The target, if Hess continues to hold above this key support zone, now comes in at $76.88.

AIG (AIG) -- Daily
Source: Dynamic Trader

At times, I will provide parameters for a countertrend trade, but only if it is well-thought-out with time and price parameters on your side and the risk clearly defined. In this context, a low-risk options strategy is best.

But trend-trade setups, or plays that go with the stock's trend, are the highest-probability trades -- and that is precisely what I'm seeing in AIG (AIG). The Fibonacci price cluster zone comes in between $37.36 and $38.09, and it includes the coincidence of at least 10 price relationships. Now, the existence of those relationships does not mean the stock will definitely hold above that area but it does mean this is an important level! If the price remains above that key zone, I will take buy triggers against it, with my maximum risk defined below that area.

Besides the price analysis, also supporting the buy setup is Fibonacci timing at this most recent low, as illustrated with the pink histogram below the chart. If this trade does start the play out, the initial upside targets will come in between $41.40 and $41.58 and between $42.01 and $42.31. Beyond that, $44.94 will become a third target.

For more information about trades and triggers, please refer here.

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