Everyday in this column, examples of stocks with defined set ups are
highlighted for possible trades and as examples of using a trading plan.
The main examples use the MACD indicator. Channel breaks of support and resistance primarily using a 20 bar break.
Moving Average crossovers of a 5 and 20 period time frame. The use of Momentum to help identify confirming changes.
Volume and On Balance Volume as confirming indicators.
Occasionally, patterns such as retracements and Head and Shoulder formations
will point our possible trading opportunities.
The use of stops is ALWAYS part of any trading decision.
Although no indicator or pattern works all the time, the track record with
the use of stops has hopefully helped you in your trading. I am happy to
have heard from so many of our readers especially in their comments on the
use of stops.
Let’s look at Micron Technology (NYSE:
MU).
On Wednesday morning, September 6, 2000, an analyst at DLJ downgraded MU and
the stock dropped 8 � points. Were followers of the plan unhappy? I don’t
think so. They were either out or short. Out is a trading decision.
MA 88 7/8 on Aug 21. MACD Aug 25 at 10:00 Am at 88 7/8. A 20 bar low on August 28 at 88.
There was a small Head and Shoulders formation from August 21 through August
28.
Confirming falling Momentum during those periods. Confirming falling OBV during the period of late August.
Any reader of this column would have been out by Focusing on Exit and use of
stops or Short in the 88 to 88 7/8 areas. MU closed Wednesday at 70.
These discipline traders are sitting with nice profits and the drop on
Wednesday was profit, not pain.
Follow a discipline and stay with your plan. Always use stops in any trade.
