It appears that the current price action is drawing a nice bullish continuation pennant. This is supported by a similar figure being drawn on the RSI graph where we currently have bullish divergence. If todays candle will be finishing in the green and no lower lows will be plotted for the day it might be worth it to open a LONG position. The trade will offer a very high risk/reward ratio and it should go as follows:
IN LONG at market before market closes ONLY IF IN GREEN SL 345 TGT1 430 TGT2 500 TGT3 575B
I noticed there is a gap at $424. Do you believe that stocks tend to close gaps with your experience. I have heard others talk about gap trading. I noticed sometimes it works and other times it doesn't. Do you typically include this idea on your target prices?
UMM_investments
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@Abatix, GAPs are considered important changes in the "price equation". That is to say that a strong change in the demand/supply ratio took place. GAPs could be used to identify a few things from a technical analysis prospective, such as significant price levels of support/resistance, a few price patterns (like 3 island reversals etc) and "magnet prices" to name few. They also become relevant in order to understand in which trend phase the price is - Breakaway / Runaway-Measuring / Exhaustion GAPS.
I certainly take them into account when they are paired with other significant indications like in this case. The selection of TGT1 430 is due to a combination of a resistance line and that small runaway gap you have pointed out. The combination gives me an indication that the price might be able to "close the gap" and close the day between 425-430 in about 3 to 4 trading days.
Finally, I would like to point out that it is much more probable for a downward GAP to be "closed" rather than for a upward one. Do not just assume that every GAP will be closed because it is not the case in my experience.
Hope it answers your questions.
Abatix
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@UMM_investments, I appreciate the information. I actually just quit my job recently. I have zero debt and have been trading consistently for the last 6 months. I am planning to make this a career and I appreciate your insight.
UMM_investments
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@Abatix, this is a very challenging field, to make it a career one must be very committed to studying a lot. The research and the thirst for knowledge must never end. The best advice I can give is to seek for professional and qualified teachers. The best investment is the one in education. Best of luck!
Abatix
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@UMM_investments, Thank you! I will definitely seek help always. I am committed to doing this.