Zooming into the daily chart, we see that following the initial sell-off over the opening days of 2016, there was a small respite on Wednesday with a small green candle painting a higher low and end closer to the upper end of the trading range from the swing low. It must however be said that a more decisive reversal candle on the day might have been even more convincing though. The stochastic is now oversold but still pointing downwards - albeit on slowing momentum.
The daily support and resistance also shows price reversing off an established potential lateral support level around R69.00/R69.50 with a falling overhead resistance line looking to cap any potential upside around the R72.00 level.
Weighing all of the factors above - including some liquidity constraints on this instrument, into a setup, I'm grading this trade at 50% of normal risk (so trading a reduced size) and with an entry around the current level of R69.80, an initial stop in as a close below R69.00 and targeting the R72.00 level as noted above, this setup yields a 2.75-1 reward-risk.
I didn't take this position given the indications of a weak opening pre-market today. Price broke down quite severely eventually nearly testing the R68.00 level intraday before closing around the R69.00 level.
ReplyDeleteHowever, with the stochastic now looking to potentially start reversing upwards, a relatively long-tailed daily candle, a close above the original stop-level (just) and the potential for some positive divergence if today's low isn't violated tomorrow (stochastic would make a higher low and price a lower low), I'm going to carefully monitor the early price action tomorrow for a potential entry into this long.
This setup will be aborted if the current day low is broken.
Entered at R69.80 this morning
ReplyDeleteLooking at the weekly charts, the minor positive divergence has in all probability been dissipated by a weak performance over the past 5 days and the weekly stochastic looks to potentially be breaking down below its's signal line again in what looks like a failed stochastic reversal. While the EMA's are still confirming a bullish trend we need to be careful at the moment.
ReplyDeleteThe daily chart has the stochastic now crossing up ABOVE its signal line from an oversold position despite some bearish candles over the past 2 trading days.
On the support and resistance we're slightly below the end of day soft stop at R69.00 so unless there's a Monday reversal to back within an acceptable rprice range, we will look to shut this trade down.
Position closed out for a 2.5-1 loss
ReplyDeleteHi Richard, Really appreciate the work and effort you put in. Just a quick question. What is a HA setup?
ReplyDeleteHi Skulk. HA is Heikin-Ashi. You can google the reference for details on these modified candlesticks but I use them as part of one the intraday systems I have in place. Drop me a line (richard@underdoginvestments.co.za) if you want to know more.
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