Thursday, May 24, 2012

So What Has Happened to LOW and ACOM?

As seems usual on thes breakaway gaps both LOW and ACOM (for the second time) yesterday made a little foray back up to areas where selling recommences. They went up a ways. I had planned to buy another put contract or two of each one if they went up significantly which would lessen the average price I paid for them overall. I did that with HUM and was well rewarded a couple of weeks ago. ACOM is already falling however this morning so have decided to wait and see if it tries to run back up before buying some more. LOW is also up but was falling back a few minutes ago so I will wait and see on it, too. So far these breakaway gaps have not been overcome and Steve Wirrick states that breakaway gaps are never filled so am proceeding on that basis. It sure worked for me on HUM as I was really biting my nails then. The stock climbed back up even back up into the breakaway space and I thought it was going all the way back up but it didn't. And when it turned back down it went down very nicely. I think given all the problems these breakaway gaps give one in the beginning it makes trying to milk it for all its worth on the way down a good idea. I sure got out too early on HUM. I sort of get the sense that people have to get used to the idea of the stock going down and when they finally do there isn't much resistance until they completely traverse the expected distance. Remember Wirrick said the distance the stock can be expected to go down/up is the same distance as the height/depth of its previous range whether it's a triangle or a rectangle. One thing also with a rectangle which he calls a "Cash In The Box" he says the longer they base the further they race, so the longer the rectangle the further a stock will go down/up once it breaks out of it. In fact I need to go back and check in his book, High Octane Trading, but I think the length of the rectangle determines how far the stock moves and is of equal distance down/up as the length of the rectangle.

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