February 28, 2006 at 4:46 pm | | Comments 0

Trend Line Extensions

Trend lines are a key element of chart patterns and technical analysis. While the most common use of trend lines is to connect consecutive highs or lows, the extensions of trend lines can often prove to be valid.

On Sunday night in my stock newsletter, I highlighted ESCL as a short selling candidate due to the rising channel the stock was trading in. This channel was easily seen on the chart. The lower trend line obviously connected the recent lows, but the upper trend line was different. Not only did it connect the recent highs, but it was an extension of the trend line which connected a series of lows back in late January.

Rising Channel ESCL’s rising channel was created by the upper trend line extension and the trend line connecting the recent lows. Our short entry was at $27.50.

On Monday, ESCL triggered when it hit our short entry price of $27.50 and began to break the lower trend line. This was at the beginning of the day, and the stock finished the day higher, taking us out of the trade at the end of the day with a small $0.40 loss. On Tuesday, however, the stock re-triggered when it broke $27.50 to the downside, and this time it worked quite nicely, giving members at a quick 10% winner and yet another trade to smile about!

Short Sale from rising channel ESCL broke support at $27.50 today for the 2nd time and gave us an excellent move for our short sale.

We have a disciplined trading strategy and we’ll give a good setup like ESCL a second chance to work. Our winning trades far outshine our losing trades, providing ample trading profits for us on a regular basis.

Why not stop by and take your FREE trial to our stock newsletter and see how we make our living swing trading?

Jeff White
President, The Stock Bandit, Inc.

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