If you read enough books, blogs, articles or tweets from traders, you'll stumble across the concept of patience. A lot of success in trading emulates from the ability to sit on your hands, sit around and wait for a trade, rather than forcing one.
A good example of this for me right now is the longer-term picture on Hasbro (HAS). My immediate thought when running scans is Hasbro is set up for a short. I noted how the Full Stochastics has dipped from overbought under 80, and we look like we might have a bearish cross.
The moving average convergence divergence (MACD) looks to be flattening out, even if it hasn't turned lower. Add in the bearish cross in the StochRSI and the Chaikan Oscillator, and maybe you're with me on those thoughts.
And then I looked at price. Price has me thinking differently.
The price action is clearly bullish. Back in December, the stock looked ready to break down into a gap and maybe reverse much lower. Well, we did fill that gap and then we headed higher. Much higher.
After a 35% push higher, which definitely fits the much higher notion, we've cooled a bit. Price has spent the past eight weeks consolidating in a clear bull flag pattern. Once I factor this pattern into the indicators, I suddenly get a different perspective and have to ask different questions.
How do I know the Full Stochastics and Chaikan Oscillator are bearish? Couldn't they simply reflect the consolidation action in price? And the answer is, they absolutely could be doing exactly that.
The StochRSI pulled back, but is holding the mid-line. That's not quite as bearish, when we consider price. Lastly, while the MACD has flattened, it is still a few weeks from a bearish cross, barring a big drop in price. Hardly a leading indicator, if you ask me.
So, when we add all this up and ask the question, "what next?" we are left with the answer "patience." If we see a close over $87.50, then I would conclude the pattern bullish and look to buy HAS with a target of $100 and a stop of $82.50. If we close under $83, then I would look bearish, with a target of $75 and a stop of $88.00.
The big picture needs to include everything. This is a chart where a bull or a bear could pick and choose exactly what they want in order to tell their story, but it would be nothing more than a prologue tempting fate.
Be patient here, as a trade will develop. When? That's for the market to decide. We merely need to be patient and wait for the market to answer the questions for us.