Saturday, April 17, 2010

Anatomy Of A Trade - ATPG

In my opinion the best trades come from being patient and stalking a good setup. I had been watching ATPG for some time for a potential setup. The stock is volatile, but has also shown strong trends. As oil consolidated its gains in March, ATPG moved sideways and formed an ascending triangle, but in addition to the triangle pattern, ATPG's moving averages were all stacked positively with the 50dema sloping upward and above the upsloping 200dema. Price tested the downsloping trendline 3 times in March. This can indicate strong resistance, but also the possibility of a powerful breakout. The MACD was above the zero line confirming the uptrend and setting up for a buy signal.

The triangle developed two proper buy fractal pivots, and at the end of March I entered a Buy Stop Limit order at 19.90 above the high pivot of 19.81. Oil broke out to new highs on 4/1, but it was several days later on 4/12 before ATPG broke out.

The late breakout coupled with the triangle pointed to a short term trade. My initial expectation was for a gain of 2 ATRs (target of 21.30+). However, with the strong close on 4/14, I decided to wait and see if ATPG could breakout to new highs. On 4/15 it did breakout but closed below its previous high. The volume on the breakout day was much less than the volume at the previous high, and in the meantime oil had made a lower high on the daily charts. These three factors indicated it was time to sell.

Of course I was not expecting to wake up Friday morning and see oil down $2. I wondered how much profit I would give back at the open. I entered an order to sell AT The Market before the open and felt fortunate to exit at 22.91. This was a gain of 15.1% in 5 days.

ATPG may break out to new highs yet, but my trade objectives were fulfilled. If only they could all be that easy.

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