Here's an idea which is about Trading the Continuation Breakout of a Continuation Breakout.
Yes, it might sound confusing in the first read. To be precise, this is about capturing a Short Term Breakout move, in an environment of a Longer Term Breakout that is currently in progress.
1a. Between March 2009 to Oct 2012, Philip Morris (PM) has been trending well in a snake-like manner, slithering from 35.00s to as high as 93.00s during this period.
1b. After Oct 2012, price took a break and consolidated sideways for a considerable among of time, about 46 Months. Basically, the price has been messing about between 95 - 75, zigzagging within the zone and forming an Ultra Large Consolidation pattern.
1c. On 17 Feb 2016, price broke out of 90.00s, out of the 46 Months Consolidation zone and has pushed towards 100.00s recently.
Point No. 1 is for us to recognize that price in an overall Environment, with price in a long-term break out phase.
2. After price broke above 90.00s to reach about 102s, it did a smaller sideways consolidation, in a form of a classic . As of 07 Jul 2016, price has managed to close above the , confirming that a short-term breakout is taking place.
3. Coinciding with the Flag Break Out mentioned in 2., we also observed a legitimate 5 Wave pattern in the process of completion. All 4 waves have been accounted for and the Flag break out in 2. is also the 5th Wave in the making.
4. There are further technical studies which also supports the case for a breakout. One study is to look at the (14) , where we note that RSI has "bounced off" a . Another technical study, which is not illustrated here, is to look at the Parabolic_SAR (0.02, 0.02, 0.2), which is indicating that price in the upward phase.
a) PM is operating in a Environment and is also in a long-term breakout mode,
b) Price has broke out of a short-term
c) Price action is also exhibiting a classic 5 Wave formation
d) is bouncing off support and Parabolic_SAR is giving off upward phase signal
We project that the price is likely to move strongly upwards in a breakout manner.
Entry: Anytime from 11 July 2016, at a price no lesser than 102.00 and no later than 13 July 2016.
Stop Loss: Below 101.00. Should price trades below 101.00, then the has failed and the position should be closed without hesitation.
There are a few ways to take profit, depending on the individual profile of the trader. This is because there's a long term and short term breakout pattern at play here.
Short Term Players can look to take profit at around 108.00 levels. Alternatively, they can look at as a profit taking guide, especially when it is approaching the of 78.000s. Long Term Position Managers, who patience and can stomach the pullbacks, might want to consider profit taking around 116.00.
Shifting of Stop Loss:
Once the price has reached around 106.00s, it might be prudent to shift the stop loss to breakeven level, to reduce the risk of loss to the lowest level.
There is a risk that the upcoming Release on 19 July 2016 may negatively impact price significantly, resulting in a loss. Also, all breakouts face the risk of failed or being caught in a bull trap.
A Flag/Elliott breakout is occurring in Philip Morris (PM), in an environment of a longer term breakout.
ER risk is coming from earnings below expectations or warning of lower profit in the future.
So to answer whether to be in/ out for ER, we must ask the question:
What is the likelihood of consumers moving away from Philip Morris' products or stop using tobacco product altogether, on a massive scale?
Once we have an opinion on this likelihood, then we should be able answer whether to be in / out and by how much...