Hi all, this Trading Plan is about capturing the short squeeze move of price, as a result of a failed breakout.
1. Nike (NKE) has been trending steadily from 2013 to 2015 Nov. During this 23 month period price has been rising in a channel like manner, from $25 to $60s, a relative increase of over 140%.
2. Between 2015 Nov to 2016 June, the bullish trend observed in 1. is broken and a Double Top reversal pattern was formed. This pattern broke out below the Neckline Support at $55, to signal to the market that the bearish trend has been established.
Price did trend lower to trade at around $52 on 27 June 2016. However price did a sharp rebound subsequently and is now holding above the Neckline support at $55.80 as of 07 July 2016. This means that the Double Top Break out is a fake move and essentially a lot of bearish positions are trapped.
3. The path of least resistance for trapped bears is a classic short squeeze move. We look at 3 points of technical evidence that the squeeze is about to come.
3a. The SAR_Parabolic (SAR`) is an indicator, which groups price movements into up and down phases. As of 07 July 2016, the SAR` indicator is showing the start of an upward move and the angle of of ascend is sharper than the previous 2 SAR` up wave.
3b. We also observed Volume spiking corresponding with the sharp V-turn rebound of price above the $55 Neckline. This indicates that a lot of new positions were established around $52 - $53, in anticipation of a change in direction of share price.
3c. Lastly, we observed that RSI has bounced off a support level around 31s with much room to move to the upside.
Projection:
Given that price action has declared the Double Top Breakout in June is a fake move and 3 Technical points to an upside, we project that price is likely to move to the upside in the form of a short squeeze movement and trying for $60s price levels and possibly beyond.
Entry:
Anytime from now at a price no lesser than $55.80
Stop Loss:
Since price should be finding support at $55.00, it is natural to place the stop below $55 or even $54.
If price manages to trades to $58.00, the position will be slightly profitable and the Stop Loss should be shifted to breakeven point, to protect risk capital.
Taking Profit:
The projection is about anticipating a short squeeze move, a partial profit taking approach is suited for this. However there is also a chance of price replicating the longer term price increase mentioned in 1.
Therefore the idea is to close 80% of the position as the short squeeze move develops and leave 20% for the potential long term upside gain.
80% of the positions will be closed, should price progressively trades higher and reach minor resistance levels. We allocate higher percentages to nearer prices, due to the higher probability of price hitting these nearer price levels.
Take Profit 1: Close 30% at 58.00
Take Profit 2: Close 25% at 61.00
Take Profit 3: Close 15% at 63.00
Take Profit 4: Close 10% at 65.00
Remaining 20% is intended to catch a potential long term move and can be closed at discretion.
Summary:
Nike (NKE) is projected to undergo a short squeeze move, due to a fake Double Top Breakout.
1. Nike (NKE) has been trending steadily from 2013 to 2015 Nov. During this 23 month period price has been rising in a channel like manner, from $25 to $60s, a relative increase of over 140%.
2. Between 2015 Nov to 2016 June, the bullish trend observed in 1. is broken and a Double Top reversal pattern was formed. This pattern broke out below the Neckline Support at $55, to signal to the market that the bearish trend has been established.
Price did trend lower to trade at around $52 on 27 June 2016. However price did a sharp rebound subsequently and is now holding above the Neckline support at $55.80 as of 07 July 2016. This means that the Double Top Break out is a fake move and essentially a lot of bearish positions are trapped.
3. The path of least resistance for trapped bears is a classic short squeeze move. We look at 3 points of technical evidence that the squeeze is about to come.
3a. The SAR_Parabolic (SAR`) is an indicator, which groups price movements into up and down phases. As of 07 July 2016, the SAR` indicator is showing the start of an upward move and the angle of of ascend is sharper than the previous 2 SAR` up wave.
3b. We also observed Volume spiking corresponding with the sharp V-turn rebound of price above the $55 Neckline. This indicates that a lot of new positions were established around $52 - $53, in anticipation of a change in direction of share price.
3c. Lastly, we observed that RSI has bounced off a support level around 31s with much room to move to the upside.
Projection:
Given that price action has declared the Double Top Breakout in June is a fake move and 3 Technical points to an upside, we project that price is likely to move to the upside in the form of a short squeeze movement and trying for $60s price levels and possibly beyond.
Entry:
Anytime from now at a price no lesser than $55.80
Stop Loss:
Since price should be finding support at $55.00, it is natural to place the stop below $55 or even $54.
If price manages to trades to $58.00, the position will be slightly profitable and the Stop Loss should be shifted to breakeven point, to protect risk capital.
Taking Profit:
The projection is about anticipating a short squeeze move, a partial profit taking approach is suited for this. However there is also a chance of price replicating the longer term price increase mentioned in 1.
Therefore the idea is to close 80% of the position as the short squeeze move develops and leave 20% for the potential long term upside gain.
80% of the positions will be closed, should price progressively trades higher and reach minor resistance levels. We allocate higher percentages to nearer prices, due to the higher probability of price hitting these nearer price levels.
Take Profit 1: Close 30% at 58.00
Take Profit 2: Close 25% at 61.00
Take Profit 3: Close 15% at 63.00
Take Profit 4: Close 10% at 65.00
Remaining 20% is intended to catch a potential long term move and can be closed at discretion.
Summary:
Nike (NKE) is projected to undergo a short squeeze move, due to a fake Double Top Breakout.
Price is currently trading around 58.00s which is the First Partial Taking Profit Levels.
It will be prudent to consider closing say 30% of position at current levels