Wait for the Trigger

 | May 12, 2013 | 7:00 PM EDT  | Comments
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Stock quotes in this article:

ctrx

Catamaran (CTRX), in the bigger picture, is showing us a general pattern of higher highs and higher lows. What this tells us is that, despite the lack of bullishness in recent price activity, it's OK to look for the possible resumption of the larger uptrend.

In light of this, I'm starting to stalk for a possible buy entry in Catamaran, and I'm seeing two zones that stand out for a possible buy entry -- $49.93 to $51.32 and $47.46 to $48.46.

First, to give you some perspective, here are those zones on a weekly chart.

Catamaran (CTRX) -- Weekly
Source: Dynamic Trader

Both of these areas include what I call "symmetry projections," or measured moves. This means some of the potential support comes from taking prior corrective declines within the larger uptrend, and projecting 100% of those declines from the most recent high. Symmetrical pullbacks will often identify an ideal place to reenter a stock within the direction of the trend.

Now let's take a look at the same setup on a daily chart.

Catamaran (CTRX) -- Daily
Source: Dynamic Trader

As you can see, Catamaran is currently above the 200-day simple moving average, which is a plus. Note, however, that it's quoted below the 50-day. This does not mean the stock won't hold above our setup zone -- it is just typically better when a stock is above both of these key moving averages.

In order to see whether it's worth placing a bet, we need to go down to a 30-minute chart and look for a buy trigger.

Catamaran (CTRX) -- 30-Second
Source: Dynamic Trader

Currently, the stock is currently holding above zone 1. In order for me to enter a trade here, I would need to see two things happen. First, Catamaran shares need to take out a prior swing high -- $52.73 is the one I'm watching now -- and, second, the eight-day exponential moving average would need to cross above the 34-day EMA. If both of these take place as the stock continues holding above one of these key support zones, that would signal that it's worth placing a buy-side bet. My risk would be defined below the low made prior to the signal.

So let's watch for a trigger in the coming sessions. If I don't see such a trigger, I will stand aside.

For more information on trades and triggers please refer here.

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