Hindsight is 20/20.
It is also the best teacher.
Here is what we can take away from LMG’s demise today.
If you were caught with your pants down today, so to speak, at least we could learn from this expensive lesson.
While a lot of traders got excited when LMG broke out of this pattern after consolidating for weeks, many traders saw peso bills rather than the red flags.
Of course, we are only human and as traders, we go with the trend and we follow the price.
Nonetheless, LMG is a treacherous stock. The wide bid-ask spread was enough to make me stay away from this. (Yeah , I learned my lesson from my HI trade. Stay away from illiquids.)
One of my friends asked me whether there was any signal at all that this was about to drop today.
That signal started way back in March 1. This is the daily chart.
Here are the sell signals on the daily chart.
1) first signal was the break below RSI 70 on March 1
2) second signal was the break below the ema 4 line on huge volume
3) third was the break below ema 21 line on higher volumes
4) break below the bullish fibo area of 38.2%
5) consecutive breaks of fibo levels
There were also SELL signals on the 5 minute chart
Sell signals, 5 min chart
1) It made a bearish crossover at 8.45 then there was a drop in prices. It never made a buy signal from thereon.
2) There were huge volumes on the red candles and low volumes on the green candles, validating the sell signal
3) At the same time , RSI broke below 50. RSI 50 is the bull-bear line so that cross below 50 is also a warning to sell.
LMG’s demise today was a tragedy. I have friends caught in this drop too. Don’t let this bring you down. Wipe the tears away , find your next prospect , and remember the lessons you learned from LMG.
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April 1 and 8, 2017