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Saturday, February 09, 2008 3:43:25 PM
** Quick Chart Lesson: Trendline Break + 50% HOLD LINE **
#1 Green Flag: Price closes ABOVE a key trendline... on chart below, the yellow line shows a key trendline, and the pink circle shows the break of the trendline...
#2 Green Flag: Where is RSI(5)? Make sure RSI(5) is above 50 (red vertical line represents where RSI(5) is on the day of the break).
#3 Green Flag: Does 50% of the big white candle "hold" (blue horizontal line)? As long as the closing price remains above the 50% HOLD LINE, then market psychology towards the stock remains bullish...
#3A Green Flag: Does RSI(5) remain above 45** whenever the 50% line is 'tested'? As can be seen, the 3rd day after the trendline break (denoted by gray vertical line), the price made a big move on the 50% HOLD LINE; however, the RSI(5) held strong above 45... next day, the explosion began...
** I use 45 as an safety policy towards 'head fakes'... sometimes the RSI(5) will drop slightly below 50, and then the next day skyrockets back above 50. By using 45, I give it an extra cushion to better my probabilities of not getting 'head-faked'...
These types of set-ups can be known as "ATM Machines"... buy at the 50% line, sell w/in the next few days and then buy back again at the 50% level (remember, ask yourself: "Is RSI(5) holding 45?" before you buy back in)...
Questions? Feel free to PM me...
#1 Green Flag: Price closes ABOVE a key trendline... on chart below, the yellow line shows a key trendline, and the pink circle shows the break of the trendline...
#2 Green Flag: Where is RSI(5)? Make sure RSI(5) is above 50 (red vertical line represents where RSI(5) is on the day of the break).
#3 Green Flag: Does 50% of the big white candle "hold" (blue horizontal line)? As long as the closing price remains above the 50% HOLD LINE, then market psychology towards the stock remains bullish...
#3A Green Flag: Does RSI(5) remain above 45** whenever the 50% line is 'tested'? As can be seen, the 3rd day after the trendline break (denoted by gray vertical line), the price made a big move on the 50% HOLD LINE; however, the RSI(5) held strong above 45... next day, the explosion began...
** I use 45 as an safety policy towards 'head fakes'... sometimes the RSI(5) will drop slightly below 50, and then the next day skyrockets back above 50. By using 45, I give it an extra cushion to better my probabilities of not getting 'head-faked'...
These types of set-ups can be known as "ATM Machines"... buy at the 50% line, sell w/in the next few days and then buy back again at the 50% level (remember, ask yourself: "Is RSI(5) holding 45?" before you buy back in)...
Questions? Feel free to PM me...
Need an Annotated Chart? Stop by my board -- http://investorshub.advfn.com/boards/board.aspx?board_id=8765
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