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 Sepracor, Inc. (NASDAQ:
SEPR)
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, SEPR had a downside gap after some bad news last week.
Today, October 23, 2000, SEPR started moving up and looks like it may try to
fill the gap from August 18 to August 19.
I would Buy SEPR on a break above today’s high of 85 3/4 in motion.
I would place a stop at 84. It should just run, but a close stop is
appropriate.
This is not a high probability trade, but when it works, the profits can be
large
Do Not take the trade if it does not break the high of 85 �.
