Coming Out Of The Dog House

Here are three stocks that appear to be coming out of the dog house: MRVL, HPQ, and RIMM. The following charts highlight potential breakout and potential upside level.











Disclosure: no position

RIMM - (Exit 1/10/11)

Today the market opened with a negative tone. RIMM gapped down on the open and triggered the protective stop of $60.93. In the afternoon around 1:00 pm, it started its move to fill the opening gap and ended the day with a small gain and testing the $62 level once again.

This swing long trade closed with a 0.71R profit.

Below is the 5 minutes intraday chart showing where the protective stop was and when it was hit.

Intraday:




RIMM technically still positive, but no need to chase it. I will continue to monitor for the next long setup above the $62 level or near the $59 support region.

Daily:

RIMM – (Updated 1/6/2011)

1/6/2011 Updates:

The trade was not stopped out today. If the breakeven stop was placed at the trigger level of $59.86 after a partial profit was taken near $62 yesterday, then today’s intraday low of $59.80 would have triggered the stop and closed out this trade. Today’s price action illustrates the importance on avoid placing stop near obvious support or resistance levels.

Today’s price action also setup a baseline near $62 for it to break in order to have a chance on reaching the 2nd target level of $64 and possibly breaking the downtrend.

Here is today’s intraday 5 minutes chart highlighting some key levels:




1/5/2011:

Three trading days into a brand new year and the market has already reminded us who is in charge. In the first trading session of 2011, stocks opened with a bang and reached their resistance level (target level) in one big opening move, then in the second trading session similar strength was demonstrated on the opening but this time stock prices faded and ended up giving back most if not all the previous day’s gain. Finally, today the market reverted to its ascend and closed with a gain. Here is the latest SP500 chart. Target level remains to be near 1300.

SP500:



Throughout 2011, I will post some of my trades and my trade analysis to help me improve my trading discipline. By posting some of my trades in public, I hope it will subconsciously make me trade little more defensively with better discretions.

Here is my first trading post for this year. RIMM was one of the stocks in my ‘swing long triggered’ list today. From the following weekly price chart, RIMM has been trending downward since the middle of 2009 to the present. It has been trading methodologically within the declining price channel.

RIMM - weekly:



Recently, after it hit the resistance from upper channel trend line, the retracement back to the lower channel trend line present a swing long trade opportunity similar to the one in April of 2010. As the confluence of different rising moving average converge toward a price level, it sets up a swing long trade. In this case, the trigger from the daily price chart is the high of the candle prior to the setup candle ($59.86), and the stop loss is somewhere between the setup candle’s low and slightly below $58 (I never set my stops at the whole number levels since these levels are like magnet and they will likely be hit.) The targets are 62 & 64.

RIMM - daily:



From the 5 minutes intraday chart, it shows RIMM spent more than three hours trading near the R1 pivot level of 59.63. As the last hour of trading approaches, RIMM broke above the $59.90 baseline level with increasing volume and it reached the $62 target level prior to the closing bell. As it hit the $62 target level, took profits on 1/2 of the position with a slightly more than +1R and move the stop to breakeven for the remaining 1/2 of the position to setup a risk free trade for the remaining position.

RIMM - 5 minutes intrady:



With the surging volume and having the price close near the upper trend line, there is a high probability RIMM will breakout from the price channel and reach the 2nd target level of $64. I will post updates as this trade progresses.

One Price Break, Many Trading Opportunities

When RIMM broke out of the $72 resistance level on Monday, 3/8/2010, it has triggered a number of trading patterns for different trading strategy and I thought it might be interesting to identify them for suitable trading strategy.

(click on the chart for a larger image)




Starting with the blue color and letter code ‘A’, this pattern is a ‘bullish triangle’. This ‘bullish triangle’ pattern has a measured move price target near the $88 level, which is the same price target level from a recent analyst upgrade. This type of pattern is more of a medium term trading strategy and most likely be traded by medium term swing traders that primary trade breakouts.

The next pattern is a ‘gap fill’ pattern, depicted by the color aqua and letter code ‘B’. This gap is approximately $10 wide and most likely be traded by short term and medium term swing traders that trade gaps. It is reasonable to expect RIMM to fill a $10 gap within days since it has a high volatility.

Next is the ‘cup & handle’ pattern colored in green and marked by letter code ‘E’. This is another breakout pattern play for medium term swing traders. This ‘cup & handle’ pattern has a measured move price level near $82.50, which also coincide with the upper gap level.

Finally, the ‘trendline breakout’ colored in black with letter code ‘F’. This pattern is for day-traders or short-term traders with holding period of no more than a few days.

The chart is highlighted with two additional patterns that were not triggered by the recent price breakout. I have highlighted them to illustrate the trading patterns prior to the breakout.

The pattern marked by the color of red and letter code ‘C’ is a ‘bull flag’ pattern. The measured moved place it near $74, a price level that was reached after it has broken out of $72. This is another trading pattern for medium term swing traders.

The price channel pattern highlighted in purple and letter code ‘F’. Medium term swing traders that buy on weakness and sell on strength will likely trade these price channel patterns.

So depends on what type of trading strategy you are trading, the recent breakout from RIMM provides trading opportunity to many different strategies. It is rare for so many trading patterns triggered by a single price breakout.

Caveat: Although these trading patterns have a measured price target, but it doesn't mean the target will be hit. All it means is there is a potential for the price to reach the target level and we still need to use our trading plan to trade these patterns.