While I’ve recently been making the case for further downside in the US stock market, including the likelihood of a powerful correction, I always strive to share the most attractive trade setups irrespective of my current positioning or market bias. My reasoning is two-fold: 1) I often trade a long-short portfolio in order to not only hedge my positions but also to take advantage of the most attractive trading opportunities, many of which can play out successfully even if they are positioned against the prevailing trend in the market or a particular sector at the time. 2) I am also acutely aware that my market bias on the market or expectation for a rally or correction will be right at times as well as wrong sometimes.
As the trade ideas posted in recent weeks have been skewed towards bearish trades (short setups), I’ve been on the lookout for any long-side trading opps that look compelling & offer an attractive R/R profile. It seems that CLX (Clorox Co.) fits that bill. CLX appears to offer an objective long entry here following the breakout & backtest of this 60-minute bullish falling wedge pattern. With a relatively tight stop based on a 60-minute close below 121.50. That stop is tactically based just below price support as well as allowing for only one more backtest of the wedge pattern, thereby offering a very attractive R/R with a minimal loss if stopped out relatively to the profit potential should Clorox reach any or all of the price targets.
note: The screenshots of these charts where taken shortly before the close yesterday but I wasn’t able to finish uploading them & composing the notes on the trade above until just after the closing bell rang. As such, I decided to wait to make sure CLX wasn’t poised to gap up today confirm that CLX wasn’t indicated to gap higher this morning (which it currently isn’t) & scrub the trade for earnings (they aren’t expected to report for another couple of weeks, estimated Nov 2nd).
Bottom line on this trade is that my expectation is for a relatively short-term swing trade, ideally closing part or all of the trade before the earnings release, as CLX only looks poised for a counter-trend bounce within a larger, primary downtrend with the stock ultimately headed down to the 113-114 area in the coming months. As the major stock indices are indicated to gap up right into resistance, I am going wait to decide when & if to add CLX as an official active trade, most likely either on a pullback off those resistance levels or a solid & convincing move above them. I just wanted to get the setup out in advance for those looking for long trade ideas as I may also post the official entry on short notice sometime today or possible tomorrow. As such, Clorox is only a Trade Setup at this time.