Catching the Knife with MSFT
Hi all,
It is May 10 2016 1:38pm New York time as I begin to write this.
Here's an idea which can be executed after you have finish reading and digested it for a while.
1 Since Aug 2010 to Mar 2013, MSFT in a sideways phase.
From Apr 2013, to Nov 2014, price is in an uptrend, with price increasing from 32s to hit $50.
After hitting 50, price consolidated sideways in a $10 range between 40 - 50 before briefly breaking above 50.
Right now price is in an intermediate sideways trend again, but this time in a form of a $6 range between 50 - 56.
Overall, price is in still in a bullish environment.
2 Let's back track to the price action of the $10 range, between 40 - 50.
Recognize that the key to trading sideways is to place a "knife catching" trade at the extreme ends of the range.
It means to go short in the face of a strong bullish bar at $50.00 and buying in the face of a bearish bar at around $40.00.
From hindsight it looks easy but it takes guts to execute on the right edge of the chart.
You will also note that 2 possible knife catching entries are accompanied by sharp v turn of the RSI(14), marked by the pink lines.
The 2 times priced turned back up, RSI was around 29.00.
3 Now let's look at the current $6 sideways between 50 - 56. In some ways the price action is similar to 2, with well defined range limits.
Also you will notice the sharp rebound on 08 Feb 2016 is marked by a v turn before RSI 29.00.
It seems like price now is doing yet another bounce up, with RSI v-turning against the RSI 29.
Projection:
We given that the current price action is similar to the 40-50 range in 2, it is likely the price is now doing a rebound from the lower end of the 50-56 range.
While price will definitely try for $56, there's a possibility of price breaking the range to trade even higher, similar to what happened in 2.
Entry Condition:
Anytime from now, at a price no lesser than 50, no more than 52 and by 13 May 2016.
Stop Loss:
We can place a Trailing stop loss below the support zone of $48.00.
There is no guarantee that price will go all the way up, so a trailing stop, starting from $48 will minimize the risk of loss from a half-hearted bounce.
Taking Profit:
Short term traders can consider taking 100% profit when price reaches around $56.
Those with a longer term appetite can consider closing 60% at around $56 and leave 40% to close at around 61.
Flipping Around if price trades below $48:
If the rebound turns out to be a false move and price trades below $48.00, it is essentially the confirmation of a double top formation.
Advanced traders can consider going flipping the position short.
Have a profitable day~
-BreakOutArtist
It is May 10 2016 1:38pm New York time as I begin to write this.
Here's an idea which can be executed after you have finish reading and digested it for a while.
1 Since Aug 2010 to Mar 2013, MSFT in a sideways phase.
From Apr 2013, to Nov 2014, price is in an uptrend, with price increasing from 32s to hit $50.
After hitting 50, price consolidated sideways in a $10 range between 40 - 50 before briefly breaking above 50.
Right now price is in an intermediate sideways trend again, but this time in a form of a $6 range between 50 - 56.
Overall, price is in still in a bullish environment.
2 Let's back track to the price action of the $10 range, between 40 - 50.
Recognize that the key to trading sideways is to place a "knife catching" trade at the extreme ends of the range.
It means to go short in the face of a strong bullish bar at $50.00 and buying in the face of a bearish bar at around $40.00.
From hindsight it looks easy but it takes guts to execute on the right edge of the chart.
You will also note that 2 possible knife catching entries are accompanied by sharp v turn of the RSI(14), marked by the pink lines.
The 2 times priced turned back up, RSI was around 29.00.
3 Now let's look at the current $6 sideways between 50 - 56. In some ways the price action is similar to 2, with well defined range limits.
Also you will notice the sharp rebound on 08 Feb 2016 is marked by a v turn before RSI 29.00.
It seems like price now is doing yet another bounce up, with RSI v-turning against the RSI 29.
Projection:
We given that the current price action is similar to the 40-50 range in 2, it is likely the price is now doing a rebound from the lower end of the 50-56 range.
While price will definitely try for $56, there's a possibility of price breaking the range to trade even higher, similar to what happened in 2.
Entry Condition:
Anytime from now, at a price no lesser than 50, no more than 52 and by 13 May 2016.
Stop Loss:
We can place a Trailing stop loss below the support zone of $48.00.
There is no guarantee that price will go all the way up, so a trailing stop, starting from $48 will minimize the risk of loss from a half-hearted bounce.
Taking Profit:
Short term traders can consider taking 100% profit when price reaches around $56.
Those with a longer term appetite can consider closing 60% at around $56 and leave 40% to close at around 61.
Flipping Around if price trades below $48:
If the rebound turns out to be a false move and price trades below $48.00, it is essentially the confirmation of a double top formation.
Advanced traders can consider going flipping the position short.
Have a profitable day~
-BreakOutArtist
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