I bought 5,000 SLW at 40.69 on the fill of the opening gap. The stock traded all morning in a triangle (in white), with a channel (in yellow) nested within it. Both trendlines at the top and the bottom of the pattern were validated as support and resistance (white arrows).
The majority of triangles that go beyond two-thirds of the way to the apex, where the trendlines converge (meet up with each other), resolve to the downside. It seems that Thomas Bulkowski did some research on that and something like two-thirds of the patterns broke to the downside.
Since SLW is acting bullish, and since this is only a one-minute chart, I decided to hold if the pattern resolved to the downside. I didn't want the problem of figuring out where to get back in, and losing my position. If the stock wasn't acting so bullish and if this chart were a longer time-frame, I would have sold a break of the lower trendline. You know how I feel about breaks of validated support ;)
The triangle did break to the downside, then it morphed (changed) into a Falling Wedge (in white) and then broke out to the upside. I bought another 5,000 at 40.62 as the stock sold off for a retest of the breakout.
I'm not one for "doubling down on a loser." That's a poor trading strategy, hoping that Ms. Market will bail us out of a loser. More often than not, she doesn't, and our losses are compounded. UGH.
This second entry was a purchase of a retest of a bullish breakout, not a purchase of a stock that is going down...down...down. If the selloff to support at the top of the Falling Wedge wasn't successful, I would have thrown in all 10,000 shares at the last low, prior to the breakout, which was 40.52, if memory serves. Actually, I would have given it another penny or three since the trendline at the top of the pattern was declining, and to defend against a little stop-buster.
The retest of the Falling Wedge breakout held ju-u-ust above the top of the pattern, then SLW rallied. Horizontal Resistance was at 40.80-40.81 (the yellow line) and 40.87 (the red line). The chart looked strong enough for at least a test of 40.87, so I planned to sell my initial 5,000 shares that I purchased for 40.69 at 40.84, just below that target, which I did when the stock rallied.
That left me with the 5,000 shares purchased at 40.62, and a guaranteed winner. My trading plan for those shares was to benefit from any rally through 40.87 resistance and to throw them in for a small gain if the stock came back into the high 40.60's. The Bulls had done their chart work, and it was time to RALLY!!!
Pitiful. SLW had two nominal breakouts (in name only) at the red arrows, but The Bulls failed to show up to buy either of those breakouts and the stock was back for a SECOND retest of 40.74. I didn't like that at all and threw in my 5,000 shares purchased for 40.62, at 40.75. Why in the world would The Bulls let The Bears bring it all-ll the way back to 40.74 after TWO little upside breakouts (the red arrows)? UGH.
ANSWER: Because The Bulls had run out of spinach, and 40.74 wasn't going to hold.
Oh.
Well-ll...the chart had the potential for a very nice gain above 40.87, and I was positioned to take advantage of it, but I forgot to throw some spinach out onto the field to The Bulls ;)
Gain: $1,400
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