Always Look to the Left
A friend of mine recently mentioned that the area to the right of price is the only place on a chart where you make money. He’s absolutely right. But I’d add that by also looking to the left, you can save money as well.
Take for instance CXO. Right now the stock is sitting in a short-term bearish formation. The stock recently declined for a couple of weeks, then has attempted to bounce – without success. That has created a small rising channel, or bear flag, which is quite likely to be resolved to the downside when taken at face value.
So am I going aggressively short here? No, and here’s why:
Short-term, this looks like it wants lower. But by looking to the left, I see more than just the selloff and feeble bounce attempt. I see that just about $3 lower is a major level which has served as both support and resistance in recent months. That could again provide buyers with a spot to take a stand, and it poses a threat to this setup as a bearish play – a roadblock for the trade.
Here’s a closer look at the chart:
Always take the short-term pattern you’re seeing in context. With that in mind, this bear flag isn’t a high-probability trade given support isn’t far below. Furthermore, the overall trend in recent months hasn’t changed, as this is really just a range-bound stock heading back toward key support. It might not hold, but trading is about probabilities, and they aren’t real favorable in this case for a move of more than about 3%.
In other words, always look to the left.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Mark | Dec 31, 2011 | Reply
Thanks for all the good advice Jeff over the past year.
Guide for the New Year’s Eve investor:
Look left, apply your indicators and then turn right.
Zigzag in your lane and put your foot down if it’s a fast lane.
Mind the shoulders! If you swerve into the ditch get out. Flag down someone and have another short.
Take a position for the New Year. Give up the shorts, the swinging, and the (Benson) hedges. Consider your options, your futures. Save your pennies and have a Happy New Year!
Mark | Dec 31, 2011 | Reply
…..Revised:
Guide for the New Year’s Eve Trader:
Look left, apply your indicators and then turn right.
Zigzag in your lane and step on the gas if it’s a fast lane.
Mind the shoulders! If you swerve into the ditch get out. Flag down someone and have another short.
Take a position for the New Year. Give up the shorts, the swinging, and the (Benson) hedges. Consider your options, your futures. Watch your pennies and have a Happy New Year!
Modoupliz | Jan 1, 2012 | Reply
A prosperous 2012 to ya’all. If you took Jeff’s trading course you might see the above trade not good for a swing but great for a day trade pop!
Anonymous | Jan 1, 2012 | Reply
Hey Mark, I like it! Makes perfect sense and driving can be a lot like trading….gotta get into traffic to go anywhere, be safe, but get to your destination as quick as possible. Thanks for sharing and Happy New Year!
Anonymous | Jan 1, 2012 | Reply
Happy New Year to you too, and I’m glad you’re identifying a setup like this for the appropriate timeframe. Keep up the good work V!
Mark | Jan 2, 2012 | Reply
Maybe…. “Use your head and mind the shoulders”
My trading plan for the New Year:
Probably going to swing a lot and throw the fundies out of the window. Going to watch pennies (against advice). Not taking up shorts, but might come to that.
Does anyone else have a trading plan for the New Year?
PS. I just did Jeff’s combo university course. It’s worth every penny and more.