as is often the case, there can be more than one way to trade off a clear chart pattern, with channels being one of the best patterns to trade. as per my original post below, had things gone the other way (the market turning lower vs. climbing higher), MA would have likely broken below this well defined channel and provided a good short entry. of course we all know that the market did not break down and so my preferred long-side entry on this trade played out very well for anyone that took it. again, technical analysis is not perfect (or at least nobody’s analysis of the charts is perfect) but it never ceases to amaze me just how often, and how accurately these forecasted scenarios (i.e.-using the data on the left side of the chart to predict what will happen on the right side of the chart) play out time and time again.
the point of this post is two-fold: 1) a follow-up to the still active MA trade (triggered when MA touched the bottom of that channel). anyone still long should raise stops. the most objective target would be the top of that channel and my best read on the 60 min chart says “a shallow pullback and then one more thrust higher, probably to the top of the channel”. however i would also put the odds pretty good that MA will first pullback to at least that mid-channel trendline that i have drawn (but not yet extended in the chart below).
2) i would also be watching this trade for a possible short entry up around currently levels, especially on another tag of the upper channel or possibly on a break of the mid-channel trendline, as this channel is getting pretty extended here and likely due for a breakdown sooner than later. original post and chart below along with today’s updated chart:
a couple of ways to trade MA:
the long-side; currently, prices have fallen pretty sharply down horizontal resistance so a bounce is likely here for quick/day-traders, assuming the intraday charts confirm an entry. for swing traders, one might want to wait until MA makes the next tag of that rising channel, which would be my preference over trying to catch a falling knife right here.
on the short-side; simply wait for a confirmed break-down of the channel for a short entry. i will often short a 1/2 position on the big pattern breakdowns like this and add the other 1/2 if the stock moves back up to re-test the channel from below, or if the selling intensifies after the breakout and a re-test does not look very likely. as always, where to place stops depends on many factors, including your risk tolerance, entry price, etc… but typically if shorting the channel break-down, a tight stop can be placed just above entry or a more liberal stop on a solid close back above the rising trendline.