Homework – Buying support on NTRI
Sep 26th, 2007 by Trader-16
NTRI trade down and it seems to find support around 47.5 area (touch this area in august and several times in 2006)
Trading plan:
Enter NTRI at around: 49.60
Stop at:47.40
Target: 57 for risk reward around 3.3
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This stock trading setup is dagerous in the sense that the stock is consolidating from its high volume move down and is slowly advancing in price as it forms a continuation pattern that may be resolved as a bear flag. Normally the low at 47.66 will need to be tested again before this stock could put in a bottom. Consequently, an entry at the 49.60 price level isn’t very attractive as support is almost two points below. A test of the 20ma at 53.57 would be my neutral price target and it will decline as time moves forward (the value of the 20ma will go down as the stock spends more time at these price levels). So my reward to risk in this case would be less than 2, but more importantly, I believe that there is more than 65% chance that the low is taken out before 53.57 is reached.
OK make that 100% chance that the low is taken out before …
This is a trap setup, and normally an excellent short setup. I didn’t get to cover it in class on Thursday and I really wanted to because it is a setup that often traps many traders. Please ask me in class, and I will explain.