Hi all,
This is an update to the Short OGE Trading Plan, which is about Trading a Double Top Pullback.
The Earnings Release on 7 May 2015 showed better than expected results.
This has driven price to open higher at 32.23, reaching as high as 32.38 before closing the day at a loss for $31.96.
This price action shows that the Earnings Release has failed to convince the market to take the long side, leaving the downside as the more likely direction for the Stock Price.
Therefore Short Entry Condition has been met and a Short Trade can be executed for $OGE
Short Entry Conditions:
Only when both conditions a) AND b) listed below are true:
a) If price is does not do a daily close above $33.00 from now.
b) Price can convincingly close a day below $32.00.
Initial Stop Loss: Above $33.00
The reason for this trade is to capture the bearish trend from a Double Top pattern.
Therefore, if price manages to trade above $33.00, it means that the Double Top pattern has failed and the reason to maintain a short position is eliminated.
Shifting of Stop Loss after entry:
If prices manages to trade to $31.50 after entry, we can consider shifting the stop loss lower to $32.00.
The reason is that if price is genuinely breaking out below, it should exhibit a clean strong move downwards $30.00 and below.
Therefore this shifting of stop loss is a conservative approach to protect risk capital.
Taking Profit: $29.00
While the theoretical Double Top target is $28, it is better to use a more conservative target of $29.00.
Advanced traders can also look to take profit when RSI (14) is close to reaching the 28.0000 level.
Risk:
The is a risk that this is a fake continuation move. If a fake move occur we can consider flipping around, covered in the next point.
Flipping Around if Short Squeezed:
In the event that price manages to trade back above the neckline of $33.00, it will mean that the Double Top pattern has failed and the short position will incur a loss.
It is also likely that this failed pattern will lead to a short squeeze move with enough momentum to push prices higher to around $35.50.
Therefore more advanced traders may consider turning around and go long above $33.00 to capture this short squeeze momentum.
References:
Double Top: stockcharts.com...school/doku.php?id=chart_s...
How to Short a Stock in Double Top Pattern Strategy: www.simple-stock-tra...o-short-a-stock.html
Using Support and Resistance Levels of Relative Strength Index> Technical Analysis for the Trading Professional by Constance Brown, Chapter 1: Oscillators Do Not Travel between 0 and 100.
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Trading View: BreakOutArtist
StockTwits: stocktwits.com/BreakOutArtist
This is an update to the Short OGE Trading Plan, which is about Trading a Double Top Pullback.
The Earnings Release on 7 May 2015 showed better than expected results.
This has driven price to open higher at 32.23, reaching as high as 32.38 before closing the day at a loss for $31.96.
This price action shows that the Earnings Release has failed to convince the market to take the long side, leaving the downside as the more likely direction for the Stock Price.
Therefore Short Entry Condition has been met and a Short Trade can be executed for $OGE
Short Entry Conditions:
Only when both conditions a) AND b) listed below are true:
a) If price is does not do a daily close above $33.00 from now.
b) Price can convincingly close a day below $32.00.
Initial Stop Loss: Above $33.00
The reason for this trade is to capture the bearish trend from a Double Top pattern.
Therefore, if price manages to trade above $33.00, it means that the Double Top pattern has failed and the reason to maintain a short position is eliminated.
Shifting of Stop Loss after entry:
If prices manages to trade to $31.50 after entry, we can consider shifting the stop loss lower to $32.00.
The reason is that if price is genuinely breaking out below, it should exhibit a clean strong move downwards $30.00 and below.
Therefore this shifting of stop loss is a conservative approach to protect risk capital.
Taking Profit: $29.00
While the theoretical Double Top target is $28, it is better to use a more conservative target of $29.00.
Advanced traders can also look to take profit when RSI (14) is close to reaching the 28.0000 level.
Risk:
The is a risk that this is a fake continuation move. If a fake move occur we can consider flipping around, covered in the next point.
Flipping Around if Short Squeezed:
In the event that price manages to trade back above the neckline of $33.00, it will mean that the Double Top pattern has failed and the short position will incur a loss.
It is also likely that this failed pattern will lead to a short squeeze move with enough momentum to push prices higher to around $35.50.
Therefore more advanced traders may consider turning around and go long above $33.00 to capture this short squeeze momentum.
References:
Double Top: stockcharts.com...school/doku.php?id=chart_s...
How to Short a Stock in Double Top Pattern Strategy: www.simple-stock-tra...o-short-a-stock.html
Using Support and Resistance Levels of Relative Strength Index> Technical Analysis for the Trading Professional by Constance Brown, Chapter 1: Oscillators Do Not Travel between 0 and 100.
Like it, Share it, Follow it~
Trading View: BreakOutArtist
StockTwits: stocktwits.com/BreakOutArtist