I Was Looking Through My
Charts And Look What I Found...
The Dynamic Wealth Report
November 25, 2009
by Justin Bennett, Editor
My wife and I did some early Christmas shopping last weekend.
We were looking for ways to spruce up our house a bit and add a little
holiday cheer. We bought some nice Christmas greenery to go on the
living room table. And I couldn’t resist buying multicolored Christmas
lights to make our patio more festive.
I got the new LED lights. Unlike the old lights, the LED bulbs are
supposed to last a long time. They’re also much more energy efficient. Sounds like a good deal to me!
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When we got home, my wife decorated the house to Christmas music. I took
a couple hours to go over some charts.
You see, I love the markets and I love finding low risk trading
opportunities. I enjoy it so much that I really don’t consider it work.
I found an interesting setup I wanted to share with you.
I call this a support zone trade. I talked about it before in my article,
“Using Support To Time The Market”.
Here’s a quick recap…
Established support zones are fertile ground for low risk buys. Excess
supply (falling price) can quickly shift into excess demand (rising
price) at support zones. This shift can send the price higher in a short
amount of time.
This setup may be forming in Coinstar (CSTR)…
CSTR provides those great little Redbox DVD rental kiosks. You can find
them in front of most grocery stores. They’re a great way to rent movies
for a buck a piece.
Notice the green line at $25. This is established support for CSTR. As
you can see, the stock bounced off it twice in the past (green circles).
The last bounce was quite amazing. You could have traded it for gains of
50% in a matter of weeks.
Keep an eye on CSTR for a bounce off the $25 support zone.
An entry around $25.00-$25.25 would be a great entry. Control your
downside risk with a stop loss at the $23.45 level. This gives you $1.55
worth of chart risk ($25.00-$23.45=$1.55).
If the trade works in your favor, look to take at least a partial profit
around $29. This gives you a nice reward to risk ratio of at least 2 to
1.
Just what you’re looking for…
CSTR isn’t likely to do much this week with Thanksgiving and all.
Trading volumes are usually low during holiday shortened weeks. But keep
an eye on it for next week.
Remember, long term trading success is all about cutting the losers
short and letting the winners run. So be patient with this setup if it
turns out to be a winner. On the other hand, if the trade goes against
you, stick to your stop loss. No questions asked.
If you do make this trade, be sure to keep an eye on it. This definitely
isn’t a ‘buy and hold’ situation!
***
Editors Note*** For more trade ideas based on support zones and
technical analysis, take a look at Justin’s
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keeping risk to a minimum.
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• Platinum (Over $1,450 per ounce)
Gold isn’t the only precious metal screaming higher. Platinum has been
on its own march. The January 2010 contract recently traded over $1,480. Platinum is below its nominal high set in March of 2008 of $2,300. The
inflation adjusted high for platinum is $2,630.
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