Planning Stock Trades: Entry and Exit

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TECHNICAL ANALYSIS Tools of Trading Goal: Identify special cause as quickly as possible, not predict the future Match the tool to the market Keep it simple but robust No two markets are ever the same; hone your judgment Like fertilizer, more is not always better

SUPPORT is a price level where buying becomes stronger than selling and prices rise RESISTANCE is a price level where selling becomes stronger than buying and prices fall SUPPORT AND RESISTANCE Support and Resistance Defined

TRADE CONDITION 1 Gap Fill Gap Gap defined Gap fill and reversal

TRADE CONDITION 1 Gap Fill Gap fill and reversal Look for reversal candles at fill point Watch for volume confirmation Protect above fill point First target is the gap starting point

TRADE CONDITION 2 Channel Breakout Breakout: any significant move outside an established trading range Channel

TRADE CONDITION 2 Channel Breakout Breakout Closing price outside the channel Watch for volume confirmation Protect above channel support or below channel resistance First target is the channel width from breakout point (measured move) Use stop orders to protect entry price

TRADE CONDITION 3 Role Reversal

TRADE CONDITION 3 Role Reversal Wait for the price pivot Look for trend reversal candles Protect below role reversal support First target is the previous high Be prepared for multiple entries if price starts channeling

TRADE CONDITION 4 Retracement lines for support and resistance Retracement lines from highs / lows Applied to multiple time frames Based on the Fibonacci sequence: 1, 2, 3, 5, 8, 13, 21… Retracements based on the Golden Ratio:.618, ( ) =.382

TRADE CONDITION 4 Retracement lines for support and resistance Retracement The key is choosing the correct high and low Tighten stops at each retracement price May trade breakout or reversal Watch for new high/low legs May be used for daily, weekly, monthly – weaker when used intraday

TRADE CONDITION 5 Trend reversal candles 1. Uptrend 2. Resistance 3. Shooting Star 4. Confirmation

TRADE CONDITION 5 Trend reversal candles Trend reversal candle Make sure it meets ALL requirements Wait for confirmation if required Protect above resistance Target is identified support or measured move Choose a few key candle patterns to start with

Planning Stock Trades: Entry and Exit