This is 3rd update to the TWX Trading Plan, which aims to capture the potential breakout move of an Pattern.
If you recall from the previous update, we saw strong price move from 88.50 to as high as 90.48, hence confirming that the breakout has occurred.
Aso the plan mentioned the below Stop loss condition.
Initial Stop Loss:
Below $85.50 OR when price does a daily close below the blue uptrend line at point 2.
Flipping Around to Short if Long Squeezed:
In the event the stop loss conditions are triggered, it will mean that the pattern has failed and loss has been incurred.
It is also likely that this failed pattern will lead to a long squeeze move with enough momentum to push prices towards $82.50 and even lower.
Therefore more advanced traders may consider turning around and go short when the stop loss conditions are triggered, to capture this long squeeze momentum.
After the previous update, price was sharply resisted at 91.00 and closed as low as 87.38 on 2015-07-24, which is below the blue uptrend line.
Therefore in effect, the plan is all but over and all Long positions should be closed.
Rationale is that if price is genuinely breaking out above, it should show a clean strong move up.
The recent price action shows that this was not the case.We would expect the Resistance to hold and not easily penetrated.
Hence, this lack of buying support indicates to me that there is a lack of strength the up move.
Although prices may eventually drift higher due to the generally environment, there is no longer a good case for a good solid breakout move.
Flipping Around to Squeeze the Longs
I did mentioned that we can consider flipping around to do long squeeze move, if the stop loss conditions are triggered.
However, there are more uncertainty involved in doing a squeezing move, especially because you are trading against the general trend.
Therefore, please put a tight stop (say above 99.00), watch the support levels and always look to exit quickly.
Personally, I would choose not to do a Squeeze move.
Instead I will prefer to hunt for more potential breakout opportunities out there in the financial universe.
On the flip side, it might add value to put in a small position for squeezing, so that you can experience what it feels like to go out there and Squeeze out other people's positions.
Short Squeeze 1: http://www.investinganswers.com/financia...
Short Squeeze 2: http://traderhq.com/understanding-short-...
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Trading View: BreakOutArtist
Best case scenario.
However, there are also other possible ways that price can moves around the S/R levels:
Also technically, price can trade to $88 and bounce back down and TWX will still be considered in sideways phase.
So while there is nothing wrong with shorting now, there exists many possible paths of least resistances for price to move.
Therefore if I execute a short here I will managed it closely. First up, a tight stop around 77.50-78 with sound position sizing.
Next I will set a trend line alert as illustrated below.
This will alert me the moment price fails to follow the best case scenario and trigger a close of position.
A measure to manage the risk if price decides to go for the other possible scenarios.
Or I could skip this trade and find something else to trade altogether~
Hope it helps?
If I have to enter the short, I will place a stop above 77-78 and place a "best case trendline" with an alert, if price crosses this line.
This is effectively placing an alert that price is no longer in the best case scenario, therefore it is time to close the position.
I hope this helps?
It is simple based on a rough estimation you expectation of how fast the price should move in your favour.
A detail explanation is here> https://www.tradingview.com/chart/GS/8EYegi2v-Taking-a-Short-at-Goldman-Sachs/#tc350314
Best of luck on this trade~