The T R A D E S N I F F E R~07.12.12 New Positions~ Pl
~3/27/12~Western Digital Corp. (WDC)
~A Measured Move Trade Example~
MORE free educational info...vote and GOTO pitbullinvestor.com/vote ... Basic elements are a LEAD-IN, a period of CONSOLIDATION and a BREAKOUT. This is the setup. The key to trading is once we have all those elements in place, we can project a line at the same angle and length as the original lead-in to predict the optimum target and maximum anticipated time to reach that target. The pattern is uncanny in its accuracy and most often stocks reach their targets ahead of schedule.
The lead-ins are easy to spot visually, but the consolidations can take many forms. The most common are annotated above. 1. A drooping flag channel, 2. A flat 'BoxTop' channel (strongest), 3. the Symmetrical Triangle, and 4. the Pennant.
Measured Moves are so successful because the original lead-in is based on profitable earnings. The retracement/consolidation period is a 'pause to refresh' as folks who made profits during the long rise now begin to take profits, while others, anticipating further gains try to get in at better prices. IF the stock still has good 'bones' (continued good news and earnings), then it should continue on its growth path at the same angle and speed as it had before the resting period. If the earnings/growth picture has failed, then there will not be a breakout and it will be eliminated as a buy candidate.
The lead-in must be long enough to insure a 25% gain from the breakout zone. The hard part is identifying the breakout, as these consolidations can be just about any shape. This is where all of the previous attempts have fallen down. What I have done is develop a nightly scan that identifies the following;
1. The precise date and price the stock began a new lead-in
2. The date and price the lead-in 'Qualifies', (reaches a minimum of 25% growth)
3. The precise date and price of the lead-in High after the stock begins to enter the consolidation phase.
4. The date and price that represent targets for each setup.
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