When using technical analysis pattern recognition or an indicator for
trading, the time frame and price should work with any priced stock or in
any time frame.
Technical analysis attempts to predict future price behavior by measuring
the crowd psychology in many cases and the strength of the opinions, fear
and greed of traders and investors. The more participants in the crowd may
often result in a higher percentage of accuracy. The same patterns do work
with low priced stock, especially when volume accompanies the start of a
breakout or reversal in a trend.
Since most traders are trading many of the widely held issues, this column
focuses on many large name stocks that trade over a million shares a day.
Let’s look at Dell Computer (NASDAQ: DELL)
Remember that we are looking at hourly bars now. I invite you to look at
this and all stocks on daily time frames, if that is your time frame for
trading. A buy or sell on an hourly bar chart may not generate the same
signal in different time frames.
Filling a gap.
Stocks that have gaps in a chart where there is no trading, usually come
back to fill a the void in the charts.
This happens both with gaps to upside and the downside.
Recently, DELL had a downside gap after earnings last week.
On Tuesday, DELL started moving up and looks like it may fill
the gap from August 10 to August 11.
I would Buy Dell on a break above today’s high of 38 5/8 in motion.
I would place a stop at 37 5/8.
Do Not take the trade if it does not break the high.
