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December 5, 2007

Isn’t it great when one of the trades you go public with just turns right around and bites you in the as*?
Just to give an eye to ZOLL which I mentioned to the group, anyone with most any combination of moving averages and indicators would avoid this stock as a bullish play, particularly when looking primarily at the last 3 months.
It’s really not all that important which set of indicators you use, if any, but the price action tells the story regardless. Short term trend is certainly down. Intermediate to long term, though, has a neutral/bullish picture to it.
MA’s certainly pointing down. Not much more to say. And sure, descending triangle even (though not yet triggered, and therefore still only “potential”). So was/is really still just a support line that is still holding. Just as reasonable to play a bounce when it doesn’t breakdown as it is to short it when it breaks down.
In any case, here’s what the long term looks like with my markings and no indicators. I think you’ll understand my thinking on the trade a bit better by seeing my view of it. It was to bounce at support and go to a target of 27. Stop would get me out if it went the wrong way. And so it did, but it still may prove to be a whipsaw. Am I confident in this trade enough to enter again and maybe even again? No. On the intermediate to long term, it really is at best neural and not so bullish. I may have jumped the gun trying to get in early here. I could still work out. The recent candles seem to forecast it stillbeing a good play off these bottoming hammers. But it’s probably safer to look at it again once it convincingly gets above 24.50 but better yet 27. Though I like the idea, I’ve never really played sideways channels, so I should think more on that instead of trading sideways just because the Market seems somewhat neutral.

On the daily, it did seem to be bouncing off support, but the candle sticks were not clean and clear in the support of the bounce. I liked that volume was picking up with the bounce, but somehow I let that overweight what the price action was telling me in the form of a spinning top, a picture of indecision.

One of the things I wrote down twice a the workshop with Dave Johnson was, “Volume is secondary!” I need to repeat that to myself. Another lesson reinforced. Candles beat volume. The other glaring issue is that the downtrending resistance line was breached intraday, but still not closed above.
Simply put, I jumped in earlier, closer to support, so I could get a better risk/reward and tighter stop/bigger position.

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