On the daily chart we see this pullback or retracement taking the price up from a low level painted in mid-June with the stochastic now at a point where it moved overbought and has crossed back down over its signal line. The retracement on the daily charts has been close to 100% of the down move from 28 May to 15 June. We also note the very bearish candle painted on 20 July 2015 which almost engulfs the prior day candle and provides a trigger for a potential move back on the direction of the longer-term bearish trend.
Finally, we look at the support and resistance graph where we can see a fairly strong resistance line in place at around the R136.00 level. As a counter-argument there is a potential inverse head and shoulders in place with that same level as the neckline and a break above that level could be regarded as bullish. However, given that the trend remains bearish and we are looking for a trigger move to take the short this is deemed an acceptable risk. On the support side there's a relatively wide area of support between R120.00 and R125.00 in place.
Our setup is going to be as follows. We are aiming to enter a short on a break of the previous day low at R131.90 and will set our initial stop as a close above the R136.00 resistance level. The target is mid-way into the support zone at R122.50 giving a reward-risk setup of approximately 2.29-1
Becoming a bit of a bad habit but managed to miss the entry on the trigger as the stop gapped down slightly at the open. Its pulled back towards the end of the day so will look to leave the order in place for a potential entry tomorrow on a gap close.
ReplyDeleteAnd again I managed to not get an entry on this one as it moved to within 1c of entry before dropping away. There's a lesson here around being more flexible. In any case, this trade has gotten away as it moved down to a R127.01 close
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