Focus on Entry on a stock that may be hitting a bottom.
We will use a combination of Trend Lines and retracement from the first
bottom of a trend reversal.
The last time we looked at INTC, the stock was 88 on September 9, 1999.
Today, it is 75. That is a 15% decline. Is INTC going into a bear market or
will it hold here and start moving up. I want to be prepared for both
scenarios. I can make arguments for both, and I will let the market tell me
which way to take the trade.
Drawing Trendlines in a Channel and at support.
Support and resistance can take many shapes. Sometimes it is a horizontal
line across support and many times it takes the shapes an angled channel.
The drawing of the trendlines is basically the same. You draw them across
the bottom support.
It is a good idea for a trader to be drawing trendlines on their charts to
help them visualize these support and resistance areas.
The chart below does not have trendlines drawn on them. You should print
this chart and draw your own.
Let's draw these trendlines on Intel Corporation (NASDAQ: INTC)
A descending trendline can be drawn across the highs from September 22 and
September 27. This line shows the resistance INTC encounters on each rally.
A support line can now be drawn across the lows of September 24 and
September 29 and 30.
It looks like a descending triangle, which may resolve itself by breaking
down through support with a target price of 63, or finding support and
breaking back to the upside.
What is interesting here, is that the base is slopping up and the Support
found on September 29 and 30, was at higher prices than the September 23 low.
MACD, Momentum and OBV is attempting to rally and they have room for a nice
rally, even if it is just a minor rally in a major downtrend.
It looks like INTC wants to rally here.
The way I would play INTC at this time would be to place a Buy Stop order
at 76. If the trade is entered here the stock would be confirming a short
term bottom and I would place a stop at 73 �.
If INTC open down and breaks below support at 73 �, I would enter a
Short as the descending triangle formation would be indicating lower
prices. My stop if a short is entered would be 75 �.
In either direction, the move here could be explosive. The trades have
reasonable risk and reward parameters and the market will dictate our
position.
