LoveForCharts
Long

RH - buy set up

RH (NYSE:RH)  
NYSE:RH   RH
This is a continuation of my previous chart. I am providing an update and will do that regularly on this chart as this is a set up stage and we are in a very interesting timezone for this stock.

The important number for us to look for closing price on this chart is 219.39 on support and 229.64 for positive breakout confirmation.

Price opened at 221.83 quickly fell to a low of 218.22, but the bulls pulled the prices higher and the day closed stronger at 223.28

The area we find ourselves is a strong congestion zone where we have seen price finding a lot of small real bodies floating around signaling lack of control on either side. Traders have felt confused with the lack of clear direction and as expected, volume in this zone of trading has been lower than normal.

Lets’ look ahead, I have my eyes on the magic number of 229.64 for a breakout to seek further action for my upside target

Target 1 : 244
Larger 2 : 270-275 levels

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Cheers
Comment: Update on price action on RH, as promised, we are tracking tis very closely as this trade, I feel, I has good potential and we are nearing an inflection point

I have laid out a series of price points which in the history of the stock price movement have acted as support/ resistance and its good to know these levels as important areas of congestion and times to have appropriate risk management tools around it

For those who have not read my previous posts on RH, lines covered in Red are past Res/ Sup lines. Important lines are :

1. CLOSE Above $229.64 (Previous price action high, signaling momentum in favor)
2. CLOSE Below $219.34 will negate our proposition to go long for the time being (previous low of most recent price action)
3. $244 would be the first target which may act as resistance levels ( previous peak)
4. $270 levels may be the 2nd target on the charts


I have also drawn a trend line when the stock moved into uptrend from mid 2019

In Nov 2019. The price broke below the trend line suggesting uptrend maybe over , however, it turned out to be a fake break out, hence the need to the price retesting and being rejected in important for a conservative trader

In the months of Nov and Dec, we saw price moving back above the trend line and find ing support in Dec 2019, with a nice bounce off the trend line.

At the end of Dec 2019, price again moved out below the trend line again and is trying to test the trend line again. Price can either be rejected from these levels or this could also be a fake break out.

The break out above 229.64 is critical on both fronts, it pushes us above the most recent price action high , as indicated in the charts and also pushes us above the trend line

Lets look at yesterdays price action: 17th Jan 2020

Bears, knowing that trend line has been broken, opened the day lower than previous day closing, suggesting their intention clearly that they wish to pull the prices further down. Bulls, however wanted to prove their supremacy and wanted to show their command on the field and pushed prices upwards.

Price made an intra-day high of $229.70,, which is above our entry point, however, couldn’t sustain the bears attack and bulls lost command, with price ending lower and the candle closing in red!

Its so important to look out for the close of the candle (in our case, close of the day, to be above our entry point. Yesterdays Intra-day highs could have given us wrong entry points.
Think about it this way. The reason to chose $229 levels as our entry point to buy on a future date, when the price was at $221 levels, was to have a day close above 229 to signify that a new high in recent price data has been made and previous highs may become support and also get a chance to review the candle on closing to identify strength of the market participants

In case we were to put a limit order and would have entered our position yesterday and order being executed, we would not have got a chance to review the candle.

Food for thought : This is just the beginning. What do you think. Who will win this battle between the bulls and bears. pLease share your comments below, it will be nice to hear your comments

Cheers
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Comments

Thanks for the chart and analysis. I was trying to equate your $219.34 to a specific Low Close or Open on the chart but it is not clear to me where you develop this. Could you share?
Reply
LoveForCharts mikeram1971
@mikeram1971, Sure, look at my. next post on RH- update 1. I think that should clarify. In case you need. Support Zone from 12th Dec 2019 to 24th Dec 2019 and support zone from 14th Jan 2020 onwards. Note there are too many candles in a highly congested zone over the last 20 odd days in a small zone. Trust this clarifies. DO look at the new update and I will be putting an update hopefully regularly on this chart, Keep an eye on this and also happy to hear any comments. Cheers
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