This lil wick stopped the position out today. Aside from this wick, the PA high for today was $188.66. Our stop was at $188.70.
I would buy back at these levels with a stop at $190.66. Buy region is $187 to $189.18. Targets will remain the same. $150 (R/R ~ 3.2) and $140 (R/R ~ 4) with a runner at $108 (R/R ~ 7.5).
The Reward/Risk is roughly the same from here when accounting for this small stop out.
Will not reenter this position again, as if this set up fails, then it should reach for another high.
This is a very risky play due to the 5-day candle closure being somewhat bullish, but the 2 day candle that closed today still offers our bearish set-up, as today’s candle didn’t negate the bearish pressure from the gravestone doji that marked the beginning of this decline.
Due to the risk in this trade, it is recommended to layer into a full position, not risking more than 1% of your trading account. One could layer in over the duration of after hours today (if provided by your broker) and during RTH (regular trading hours) tomorrow, assuming today’s high of $189.18 holds.
20 min tf (evening star formation) and the 1 hr tf (bearish engulfing) have the bearish triggers. (see charts in the beginning)
If one were to want a trigger on the 2hr tf (see below), then a close below the white line with the next candle would provide that trigger. FWIW, my Think or Swim chart has a bearish engulfing on the 2hr tf.
Every hourly timeframe that I track from the 12hr down has reached at least 2 standard deviations into the Bollinger Bands – while this isn’t a sure-fire indicator, it does give strength to a potential top being in place.
I had an inclination that this stop out could occur today. In an effort to avoid a run up and go, it was more prudent to keep our stop tight until some other triggers were created.
If the current count is correct, then this last leg up, wave (c), was an ending dig, which implies a swift return to its origin.
IMO, I think this instrument can see $175 region over the next 7 trading days.
PREVIOUS WRITE-UPS BELOW:
As expected, price moved higher to start the week. Our stop is just above today’s high and will remain where it is at $188.70.
A couple of hourly tf candles suggest this was the last push up for this potential c wave higher. The 6hr tf (above) formed a hanging man, bearish harami combo – suggesting price can go higher before confirming the bearish intent (so far this is playing out in after hours). If we recall, the 5-day candles are a recent trio of hanging men.
The 4hr tf (above) gave us a shooting star/grave stone doji, with today’s high marking the upper shadow of this doji. As long as a 4hr candle doesn’t close over the high of this shadow at $186.65, then the bearish pressure from this candle will remain.
I have two counts that can take current PA to just above $188 and into the $188.50 region. In order to adhere to the system’s 3/1 min Reward/Risk profile, the stop will remain the same. If options are being utilized, then their stop could potentially be set a tad looser based on your risk tolerance.
Tomorrow could be a telling day for this instrument and the proposed path as the 5-day candles will close. Maybe we get another hanging man or a different clue; whatever it may be, it will be covered in the update. As for today’s candle closure, we will focus on the 3-day candle that closed as a doji – noting indecision. This candle also satisfied the intent of the previous bullish engulfing candle by experiencing higher price during this period. I still believe there is the possibility of creating an island top on this 3-day tf, but it could take a few more periods until that unfolds.
PREVIOUS WRITE-UPS BELOW:
The set up is above. Stop will remain the same for now. If PA can get past that next pivot on the red path, the stop will be adjusted to BE (Break Even) or close to BE.
The weekly candle closed as a bullish engulfing, suggesting higher prices for this week. This doesn’t mean this week’s candle needs to be green though.
The 3-day candle closes tomorrow/Monday, and it should offer some clues for the rest of the week. Currently it is a doji, but in order to start applying bearish pressure, it would be ideal for this candle to push into and close in the lower half (or lower) of the previous candle’s body. If this occurs on Monday, it is a great indication that more bearish pressure is building for this instrument.
I will update once we have another clue.
ANET has met the criteria for a swing and long-term hold.
The 5-day candle closed today as a hanging man and confirmed the bearish harami combo – also of note is the preceding two candles are also hanging men formations; so, 3 hanging men in a row – wonder what that means?
The daily time frame appears to be potentially creating an island top formation. If this instrument gaps down and goes, then this topping formation will be complete and a short/mid-term top will be in place.
The 3-day candles close tomorrow and it will be interesting to see what this current candle morphs into. This timeframe also has the potential to create an island top, and if it were to do so, then this instrument should gap down on Thursday and not return to that gap for quite some time.
Swing targets (totaling 2) are shown in the below chart and timing is accounted for. Right now expecting targets to get hit by early/mid September for the yellow 3 at $150 and November for the yellow 5 at $140. This would complete the a wave of the (A) wave down.
Entry price is today’s close at $179.65 with a stop at $188.70. RISK = $9.05/share purchased. This gives us a reward to risk at Target 1 @ $150 R/R = 3.27 and at Target 2 @ $140 R/R = 4.38.
It is suggested to keep a small bag/Runner (assuming our stop holds), as a long-term target is $108 (white A), estimated timing is June 2024 – R/R for this Runner is 7.91+.
I also have lower targets (that could be reached by early 2026 or into 2029) that are in the $80/75 region, but waiting out this potential (B) wave up would not be a wise allocation of capital, because this (B) wave high should close the gaps that currently exist and could be created – but deploying capital in that potential (C) wave down will be the play.
Capital preservation is the most important aspect of the approach outlined above, and with that in mind, the goal is to bank profit. If price does fall out of the buy region and offers enough of a cushion to raise stops into profit, then this will occur as to protect investments to the upside.
It is highly suggested to risk no more than 1% of your trading account on this swing and long-term set-up.
RISK = $9.05/share
(Account balance x 0.01)/RISK = #Shares Purchasable
Trading involves risks, and you are responsible for your own trades and decisions. The information provided above is for entertainment purposes only and is not a recommendation to purchase anything related to this instrument or other instruments of similar composition.
Wave fives in EW often end with a volume spike; IMO that looks like a volume spike. Bearish divergences in MACD and RSI are on the weekly timeframe and lower.
If one wanted to play puts for this initial ride down in the a wave of the (A) wave, then potentially 19 Jan with a strike of $150 could be of interest or even the 21 June with a strike of $140. Only utilize options if you know how to mange them, and as always, don’t risk more than 1% of your trading account on any position, and with options it is suggested to only risk 1/2%.