|Boasting a share price of more than $80 by late July 2011, Baker Hughes (BHI) has fallen by nearly $30 per share in just two months. After enduring a six-and-a-half week period of sideways consolidation, the stock is now the recipient of a new Rahul Mohindar oscillator (RMO) swing sell signal, one occurring on wide range and heavy volume. As you see, the stock's price is getting close to the lower end of the range-bound pattern (pink shaded area) so it may be a good time to consider how to latch on to BHI's sudden surge southward.|
Further, long-term money flow (based on the 100-period Chaikin money flow histogram) is poor (but not horrible) at this point and the stock is also experiencing significant downside momentum (based on the RMO at the top of the page). On the comparative relative strength side of things, BHI is also looking weak, so this could be a good short sale to ponder, especially if the lower end of the pink support area is broken through on (once again) big volume and range. See Figure 1.
|FIGURE 1: BHI, DAILY. When a liquid, large-cap issue flashes a sell signal amid a backdrop of declining momentum and poor money flow, aggressive traders begin to take notice.|
|Graphic provided by: MetaStock.|
|Graphic provided by: RMO indicators and tools from MetaStock 11.|
|Here is one way for aggressive traders to play this short setup. Enter half a position on a drop below Wednesday's low of $54.19 and then place a buy-stop for the same amount of shares (as in, "Buy to cover") above Tuesday's high of $60.20. If $52.69 is taken out soon, add the second half of your short position. Then just manage the trade with a two-bar trailing stop of the daily highs until the final stopout. It's a "dumb as a box of rocks" way to enter, manage, and exit a trade, but so what? It can still help you make some (and keep some) profits on another surge lower while still strictly limiting your risk. Now, that's not such a bad deal now, is it?|
|Title:||Writer, market consultant|
|Company:||Linear Trading Systems LLC|
|Jacksonville, FL 32217|
|Phone # for sales:||904-239-9564|
Traders' Resource Links
|Linear Trading Systems LLC has not added any product or service information to TRADERS' RESOURCE.|
Click here for more information about our publications!