Wednesday, September 21, 2005

ENTU chart setup


I mentioned ENTU this weekend as one of the highlights from my market homework software. This is one of the reasons why I continue to run the software even when the market is dead! Today ENTU had a reversal candle that was almost identical to the one XWG had back in July before running up nearly 100% in a few weeks.

To review, the way I like to trade chart setups like this is to try to get a small position when the volume is very light and I feel the stock is near support (the lower purple line on the given chart). Today's reversal candlestick reinforces a high probability bottom because it flushes out all the sell orders. I'll add to my position when the upper-channel line is crossed. The upper channel line is the downward sloping line across the top of several price highs (the upper line drawn in purple on the given chart).

It is important to remember that no chart is an island and must be considered within the context of the market direction in which it is trading. I'm bearish on the market so I'll be hedging any buying that I do in ENTU against a large short position in the QQQQ, which looks to be on the brink of disaster.

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