Entry time: 09.46 EDT.
Exit time: 09.48 EDT.
Entry price: $34.97.
Exit price: $35.28.
Strategy: Reversal long.
Net profit: 27.50 cents/share.
Criteria for taking the trade:
1. The market is in uptrend in the short term (SPY daily chart below).
2. CBI has visited a strong support (daily chart below) and it was hovering about 15 cents above its lower point. The possibility of a reversal here was quite high because the market had a mildly bullish sentiment this day and the stock was visiting for the first time a strong support. Many times a stock will stop some cents prior to the support because trapped short sellers or satisfied buyers will buy sooner in order to close or open positions, before the stock leaves this price level (see page ”support resistance power criteria” for the explanation of the mechanism).
3. Although in the 1 minute chart the stock hasn’t stopped exactly at the lower point of the daily support we were ready to take the trade on the first sign of the expected reversal. The entry was a little late due to the needed confirmation (not always a good tactic) and partially based on the strong momentum of the stock and the fact that the target was 50 cents above the entry point.
We exited using a market order due to the high risk of the trade (that’s why it lasted only 3 minutes) and at a time where we were gaining 41 cents/share. Finally the transaction was made below our expectations due to high volatility, for a net profit of 27.50 cents/share.
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