Pattern - We saw the highs were descending and creating the upper trend line resistance.
Oscillators - With stochastic turning we anticipated that this pattern could break higher. Note MACD histogram started to turn as well.
We then scanned the components of KRE and came up with a short list of long setups, listed on the right of the chart. SIVB chart is below.
Stochastic - the oscillator on the chart gave a great entry signal.
Fibonacci - note we held the 38.2 retracement off the recent pivots. This signaled relative strength.
Pattern - we saw a triangle with oscillators pointing to a move higher.
Moving Averages - note how prices pulled back off the May 28th high and bounced in the "box" zone between the short term and medium term moving averages. Prices did not fall through this area.
I find simple is better. The chart is clean and easy to discern.
Indicators are minimal but support a good risk/reward setup.
Targets are based on height of the pattern and fibonacci extensions. Note price is "flagging" right on the 127 extension. I would expect this pattern to move higher over the next couple of weeks. The next target would be the 161.8 extension if this scenario plays out.
So, in a nut shell, I have a game plan for this sector and the stocks referenced on the KRE chart above.
Stops are set using a risk/reward of 3:1 on a perfect trade setup. I typically limit losses to 3-5%. This is not a hard and fast rule. The more expensive the stock the smaller risk I usually take.
Remember a 10% loss only takes an 11% winner on your next trade to break even. Whereas, a 50% loss on a position requires the trader to make 100% on the next trade to break even. Simple math. The longer you can stay in the game, the higher your odds are of winning at day trading.
Check back often as this section will expand.
Most of my followers have shown an interest in actual trades, what indicators were setting up and what the market was doing at the time, rather than educational, which can be found in the books in the right column.
Current chart KRE, one week later +10%. Thats relative strength at work!