Waiting for a Signal From Gilead

 | Dec 18, 2013 | 9:00 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:


To hold or not to hold ... that is the question. When we are looking at a particular trade setup based on Fibonacci, one of the most important things for me is for price to hold above a "trade zone"... and then for a trigger to fire off, telling me it is worth placing a bet against it.

Now, since the zone typically defines my risk, I like to go down to a lower time frame chart to look for such a trigger. This way, we should see a signal fire off relatively close to where our risk is defined.

My triggers are relatively simple. If I have a setup on a daily chart, for example, I typically go down to a 15-minute (the aggressive swing-trade trigger) or 30-minute (regular swing-trade trigger) chart to watch for my trigger. (You will tend to have more stop-outs if you use the aggressive 15-minute chart trigger.) For a buy-side setup, I want to see two things. I want to see the eight-day exponential moving average cross above the 34-day EMA (moving average crossover), and I also want to see a prior swing high taken out, which would also suggest a possible shift in the trend.

For example, we would generally see a pattern of lower lows and highs (on the lower time frame chart) as we move into a daily support decision. If we see a shift by taking out a prior swing high, this is the first indication that the pattern may be shifting to higher highs and lows. With this in mind, let's take a look at a trade setup in Gilead (GILD).

On the daily chart of this stock, I'm looking at a beautiful symmetrical pullback so far. This current decline is very similar to a few of the prior declines within the larger uptrend. Besides this, price is above both the 200- and 50-day simple moving averages.

I would like to consider two price support clusters for a possible entry. The first zone comes in at the $67.31-$69.25 area. The second zone comes in at the $64.75-$65.42 area. So far, price is testing and holding above zone 1. I am not yet seeing a buy trigger for an entry against this zone. Be patient.

Besides the price work that is suggesting a possible low, I'm also seeing some timing cycles between Dec. 16 and Dec. 19 that also suggest a possible low. Notice that the last decline in Gilead lasted six trading days. We are currently six trading days down from the last high.

When I see swings that are similar in time, I really start to pay attention. Bottom line, I am stalking Gilead for a possible entry on the buy side against one of these two zones. I am patiently waiting for such a trigger before I will place a bet on the buy side using a bullish options strategy. If I don't see a trigger, I will stand aside. The potential upside target at this point in time is the $78 handle.

Columnist Conversations

Now that AAPL has violated the shorter term support, these are the two areas I have to consider for new buy en...
The symmetry is holding up in MCD.  Target 1 is 163.34 if we continue to hold above here!  ...
As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.