I continue experimenting with the capitulation setups. The basic principle with this setup, as I see it today, is that after capitulation (extreme move with high volume in one direction), the market would most times attempt to self correct the price imbalance, creating a sort of bounce from the bottom of the move that is, at times, quite fast.
The tricky part about these setups is to be able to identify when the true capitulation takes place; one also need to have good timing to get in for the move in the opposite direction (bounce). An additional challenge is that price sometimes would not revert immediately so it is hard to predict direction.
In the case of the SU trade, the parabolic move with wider bars and higher volume was the clue that this was real capitulation. And the series of higher lows was an indication that eventually price would spring back up. I did not like the fact that the bars that formed around S2 had long higher wicks, but I decided to take the risk and go for it because the previous day low (marked in black in my chart) was a reasonable target.
5 comments:
What made you enter the trade after the 4th high and not on the 3rd high. What point of entry you look for in these type of trades.
Hi Anon~
I actually entered on the 3rd high (just above S2) but ended up scratching the trade within minutes because price was struggling (I think the 3rd one might be better technical entry, but it did not work).
As far as point of entries, I am still experimenting and will keep posting my progress. In my limited experience with these setups I can see that a C&H or ascending triangle is very desirable.
Anarco, the coals all slid down at the open with the neg factory news. I was impatient and went long way early and stopped out. Perhaps better to short at the open with news in hand "seems" like would have just dropped!
I hear you bl.
Although sometimes when stocks are falling off the gate it is hard for to get any reasonable entry points.
Anarco,
Ye, they are just rying to get out of the building fire, looks like. Sell at whatever cost. And the VP's pumping up the drill energy Thrs nite made coal oil solar rally at the gate. Those are th kind of plays I want to take advantage of: opportunity.
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