Tuesday, October 06, 2009

Anatomy of a Successful SPY Trade - Moving Average Oversold Bounce Setup

This setup was given to Trade Report subscribers. SPY was marked as a "bounce trade" setup on Friday as it neared the 50 day moving average and became short term oversold using stochastics as the oversold indicator. I entered Monday morning on confirmation.

The stop was set under the 50 day moving average, with an initial target of $106--giving 3:1 reward to ratio.

The stock is now near resistance. Notice the distributive volume pattern. This suggests failure at resistance. Entry in the $106-108 range offers a decent short setup.

Note: I used SSO (leveraged SPY ETF) as my trading vehicle, but am using SPY as the example since more people trade with SPY.

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