When a trade setup is identified and eventually plays out, it typically does not go straight up or down in the direction you want it to. If you are a nimble trader and have time to focus on the market during the trading day, you can adjust in and out of your positions.
Many of you may just stick with the stocks you like for the long haul. I typically work with day traders and swing traders rather than longer-term traders. I'm going to start to describe my original trade setup in LindedIn (LNKD) and what we should look for next if the bigger-picture target I'm looking for is likely to be met.
On Jan. 16, a low was made in this stock at what I call a Fibonacci price cluster that came in at the $208.86-$210.27 area. At least that's what I'm seeing, as I recreate the setup. This zone was the confluence of a .618 retracement of a prior major swing illustrated on the chart below, a 1.272 extension of a prior minor swing, along with the 100% projection of a prior major decline of $33.77.
The second swing ended up being very similar at $33.65. The actual low was made at $209.60, which was directly within this price cluster zone. This was followed by a $25 rally in just a few days. Now, if you are shorter-term oriented, there is a good chance that you trailed up a stop-loss order and got knocked out of the long side.
Now, if that is the case, this is the way I want to look at it.
Since I am still considering the Jan. 16 low key and pivotal, since it was made at an important price cluster zone, I know that if it is any good, then it should hold on a pullback or retest of it. Then it should re-trigger an entry on the buy side. There are two areas that I'm watching on the daily chart. The first is the .618 retracement back to the recent low at the $219.44 area. The second area is the combination of the .786 retracement that overlaps a 100% projection at the $214.82-$215.11 area. If we look at the 30-minute chart, we can actually refine that support, since there are more swings of off which to run these price relationships. Let's look at that chart next.
On the 30-minute chart, the zones to watch are $218.27-$219.44 and $214.30-$216.89. If price can continue to hold above one of these two general zones, I want to take any 15-minute buy trigger in LNKD and define my risk below the low end of the support clusters. The potential upside target if the rally resumes remains at the $252 area. Let's see if a trigger fires off or not in the next few sessions.
For more information on triggers please refer here.