Hain Risk Reward Is Healthy

 | Sep 14, 2013 | 6:45 PM EDT  | Comments
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Stock quotes in this article:

hain

Trade setup: Buy Hain against 76.00 to 77.69 price cluster zone

Risk: Below the 76.00 support or below the 77.71 swing low

Targets: Initial target if the 77.71 swing low remains intact is 87.59.  Target 2 is 90.28.

Above is my trade setup in Hain Celestial Group (HAIN). I am currently long via options and will consider myself wrong the setup if 76.00 is violated. Let's go over what I like about this trade setup. 

First we are looking at a nice bullish pattern of higher highs and lows with price above both the 200- and 50-day  simple moving averages. We are also looking at a nice symmetrical pullback after new highs were made late August. This symmetrical pullback is also what I consider an official two-step pattern into the most recent low.  There is a clustering (more than 3 price relationships) of price support relationships that comes in from the 76.00 to 77.69 area, but with a focus around 77.08 to 77.69. This tighter cluster includes two 100% projections, a 0.618 retracement back to a recent low along with a 1.618 extension of a prior minor swing. I have already seen buy triggers against this recent low.

Since we are not anywhere near the initial upside target for this setup, you can look at an entry near current levels and define your risk either below the recent low, or below the low end of the larger price cluster zone at the 76.00 area. 

Now for the other markings on the daily chart below. First I noted that this recent decline into 77.71 which was $7.77 is almost equal to a prior swing down of $7.79. Also note that the recent decline into this low lasted 10 trading days.  This is similar to two prior swings also marked on the chart which lasted 11 and 9 trading days.  So besides the price support, we have some "timing" factors that support this trade setup. 

Bottom line, we have support, we have initial targets for the trade and we also know when we should consider it "wrong".  The risk reward on this one is pretty healthy. Let's see if it plays our or NOT!

Source: Dynamic Trader

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