*Shankapotamus'' Playpen*

[Chart Addict]

GARB – Lesson on Failure Avoidance

It sure did look like a nice setup. But it failed to follow through.

Don't you just hate it when that happens?

I do.

I'd like to emphasize at this point that as nice as a setup looks, never buy in until you have clear buy signals. Let's look at this issue a little more closely.

On the conventional candlestick chart, linked to directly below, you'll see that the PPO never crossed over to provide an entry signal. Volume didn't follow through to turn the stock through another upward cycle because the market didn't believe in the stock. The chart was all that you needed to know that.

http://stockcharts.com/freecharts/gallery.html?garb

Curiously, the Renko chart provided false entry signals, however it also provided more than ample warning that the setup was failing, and it provided the warning in timely enough a manner as to have graciously bailed you out at or near break even.

http://stockcharts.com/h-sc/ui?s=GARB&p=D&yr=0&mn=6&dy=0&id=p66979636664

By using both charts, the trade could have been avoided completely. Indeed, I never entered it myself. Always wait for confirmation. The crucial point is that even the best of setups can fail, and take your trading account down with them.

Here is a frozen-in-time Renko chart of GARB with but one significant trendline.