Tuesday, April 20, 2010

SLRC still looks interesting!

If you look at a 10 day 15 min chart of SLRC you will see that after spiking this morning from $22.93 to $23.76 in the first 10 mins or so it traded in a tight channel between $23.29 and $23.50.

Purchasing this stock on a break of the $23.50 resistance and then placing a stop at about $23.30 will mean a risk of $0.20 per share. A target of 3R will be $24.10 just below all time highs for this stock of $24.14.

I believe this is a high probability trade for three reasons: (1) the overall markets are in gear to the upside on all three time frames (long, intermediate and short) especially with the current powerful bounce after last Friday's sell off; (2) SLRC has been in a strong up trend since it has been listed and has found support at the 20 day MA everytime it touched it an occurence that took place two days ago and (3) If you look back to Monday 12th April, 2010, you will see that if formed an almost identical pattern from which it broke out the following day and spiked into all time highs.

These set ups I like to trade. Because once SLRC triggers and spikes up by more than 3R I can move my stop to break even. Hopefully SLRC closes near its high for the day. I will hold on and hope it follows through even higher the next day. By this time I will have way more than 3 R's looking to hold out for even more R's until I see weakness. If however it reverses and moves sharply lower the most I will lose is commissions. Worst case and least likely scenario is that it triggers and turns around immediately. In this case I will lose 1 R + commissions assuming I do not suffer any significant slippage. It can also gap up tommorrow in which I will pass on the trade just as I did today!

Apart from SLRC, I see no other set up that I find really enterprising. So SLRC will be my major focus tommorrow.

Good luck and good trading!

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