Technical Trade Analysis - RBY

I've titled this article Technical Trade Analysis - RBY but as you'll read below, there's a bit more to this particular story.

First, a little background on this particular trade analysis - this was an actual trade, not by me, but one that my father had successfully made.

My father entered this trade and bought shares of RBY for $4.09 around November 8, 2010 (I'll fill in the actual date when I check with him). He wound up selling on November 29, 2010 for a 44%+ profit, less than a month after he entered the position. (congratulations Dad!)

I'll leave his technique for finding stocks and reasons for entering a trade for another article if he decides to share his strategy (maybe even write an article to share), but after looking over the trade myself, I noticed a couple of things that I wanted to point out.

The first chart below shows the area circled where my father purchased his shares of RBY. You can see that there was a Gap right before he entered his position. Many traders get excited and buy once a Gap has occurred but I don't think this enticed my father and here's why:

My father is not your typical news/impulse trader/investor. He keeps a journal of stocks he is watching and records daily price action so he can study a stocks price history before he enters into a position. I'm sure he had RBY on his list of stocks to watch before the Gap occurred.

You'll also notice on the chart that the RSI was not signaling potentially over-bought and the MACD was signaling an uptrend was under way.

Technical Trade Analysis RBY

The next two charts is where things get interesting, (to me anyway). If you had seen the Gap occur and decided to wait to see if the Gap was filled and then go from there, you would have seen as in the chart below, that after the Gap was filled, prices continued lower near November 14th,15th but then stabilized.

Once prices initially moved lower through the previous Gap, many traders would have gone short. Instead, prices stabilized and formed a base, and then moved higher once again.

As prices moved higher around November 16th, 17th, 18th, a new pattern emerged, a classic Cup-with-Handle. The typical entry signal with a Cup-with-Handle pattern is upon the breakout of the high at the beginning of the handle, in this case at Point (A).

For the less risk averse and those who look to try and anticipate successful patterns in advance, Point (B) provided another entry signal upon the break of the trend line formed with the down sloping handle in the Cup-with-Handle pattern.

Cup with Handle Pattern

RBY - Cup-with-Handle

Yet still, even without recognizing the Cup-with-Handle Pattern (which you really should learn to recognize), another pattern can be seen, an Ascending Triangle (which typcially occurs as part of a Cup-with-Handle Pattern) with an entry signal on the breakout:

RBY - Ascending Triangle

As a final mention as part of this technical trade analysis using RBY, for those of you who like a little automation and assistance in recognizing potential entry signals, had you been a member of Market Club and had this stock on your watch list, their Trade Triangle technology triggered an Alert on November 5, 2010 at $4.22.

MarketClub - RBY

Using MarketClub, you can test out different strategies on stocks in your watch list and see how they perform, and then set up Alerts in MarketClub itself to notify you of any new signals as they occur. If you're not already a member, you can test out Market Club during their low-cost $8.95 30 day trial period (current offer at the time of this updated post 11/15/2011).

Return From "Technical Trade Analysis RBY 11302010" To "Stock Trades"

Elliott Wave Videos

Learn to trade in the direction of the forecasted trend with this free video course. Click here to start watching: Free Elliott Wave Video Lessons

Free Newsletter Updates

Trading Resources

Stock Trading Software
Stock Trading Software
Stock Trend AnalysisStock Trend Analysis