SLW: Bear Trap

SLW opened Gap Down yesterday, to 39.00, breaking the neckline of a putative H&S Top in the intraday chart, and also breaking the lower trendline of a possible Bearish Rising Wedge in the daily chart, which we'll look at later. I wanted it short near 39.74 (yellow line), at horizontal resistance and at EMA resistance basis the 10-Minute chart, but the rally stopped shy of my price, so I couldn't get short there.



SLW sold off again, toward the early lows, then rallied a bit. I shorted it at EMA resistance basis the 1-Minute chart, at 39.26 (white down arrow). That worked out fine. The stock broke the early session low, and fell to 38.72. The short trade looked golden until...



...this possibly Bullish Hammer showed up (white arrow). SLW went back above the broken neckline of the H&S Top and was hanging tough, above it. UGH. That's "Ye Olde Knuckle-Biter" that we've frequently discussed. It leaves us wondering how sincere The Bears were about the neckline breakdown when they don't defend it on a rally. The Bulls "should" get hammered at that broken neckline (horizontal white line), but they didn't.

I, generally, am not real patient with "Ye Olde Knuckle-Biter," and I wasn't yesterday. I gave The Bears a chance for a few minutes to take the stock back below the neckline, but when they didn't, I decided to "take the money," and covered my short position at 39.14-39.15.



WHOA!!!

We can see that the necline breakdown and the move down to 38.72 (yellow arrow) was a very ugly Bear Trap. The Bulls rallied strongly and took out the high of the Right Shoulder of the H&S Top (horizontal red line), then challenged the bottom of the broken Rising Channel two more times, after challenging it on Tuesday (the three white down arrows). Very impressive!



Basis the daily chart, the 39.00 opening was only a nominal takeout of the lower trendline of a possible Rising Wedge (six and a half cents), but the move down to 38.72 was a fairly significant break, which we now know in retrospect, set up The Bear Trap. Ms. Market enjoys being naughty like that ;)



Gain: $550