I first wrote about BHI here:
July 12, 2016 BHI chart
I would like to share with you, my virtual students, how I traded BHI using the 10 minute chart from July 28-29, 2016. The intention is not to brag, but to show how to be a methodical trader so you will not be controlled by your emotions , specially when the impulsive move happens.
BHI had been consolidating from July 18 to July 27 and formed a pennant in the daily chart. There had been 3 days of dojis from July 25-27, 2016 , forming higher lows. The daily chart was bullish.
Since higher time frames , weekly and daily , were bullish, price was likely to go up. But to establish the entry and exit for the day, look into the minutes chart .
BHI had been forming a triangle in the 10 minute chart from July 15. Thanks to my friend Wilson for pointing this out =).
However, it had been struggling to break above the 38.2% Fibonacci level at .101. This is a key level to break for a successful reversal.
Between point 3 and 5 on the 10 minute triangle, BHI formed a bullish hidden divergence, which pointed to a possible reversal in the 10 minute chart. This was followed by a double bottom on the RSI.
A series of higher lows followed and an eventual breakout from both the triangle and the 38.2% Fibonacci level. The triangle top was retested and then made a bullish EMA crossover.
I bought 50% of my allocation from .103 to .104 , after the successful retest.
Another triangle breakout retest occurred before a strong move up. I bought the remaining 50% of my allocation when it broke above .113 because it had strong momentum towards the close . (Although I bid at .115, I was lucky that the order was done at .113.)
The next day, I plotted this chart to see where the resistances were. The chart shows 261.8% resistance at .119 from the July 13, bottom, before the start of the move.
My plan A was: a) sell if this point resists or b) hold if this level is broken . Since it gapped up above .12 at the open, it was clear that it was a hold at this point.
Now it is time to look at the resistances and supports in the minutes charts again since the price had gone up too fast the day before and was unable to establish firm support , except at .113, which was too far from the current price. I wanted to protect as much of my profits as possible in case the price takes a turn.
On the break of .119, the next resistance was at .121. Plan B was: a) hold if .121 holds b) sell if .121 is broken to the downside.
Price touched .122 twice then formed lower highs and RSI weakened. I decided to sell everything between .121 and .120 because it was clear that it could not break 138.2% Fibonacci extension. It was also at a high risk of consolidating because the EMA’s have expanded too quickly.
Here are those transactions, for transparency. July 28, 2016 BUYS
July 29, 2016 SELLS
A bearish crossover occurred on the break below .119 on July 29, 2016 at 2:42 pm.
The market sold off and price closed at .114. As a momentum trader, I would say that my BHI trade was a good one.
My trades are based on minutes charts since this is my preference. I shift between 3, 5, and 10 minute charts depending on the stock that I trade.
If the minutes charts prove bullish again on the minutes chart, I will be ready to re-enter.
This is my style and I am only sharing it . I am quite sure veteran traders employ more efficient strategies which I hope to learn someday too. =)