Monday, March 10, 2008

ER2 Divergence 3/10/08

This morning another divergence play was spotted at about 9:55 and triggered a few minutes later.

Initial Risk = 1 point
Initial Projected Target = 4 points

Risk to Reward = 4
Net profit: +4 points or 4R

At 9:55 our MACD oscillator indicated a divergence with a lower high, however price indicated a higher high. Using Fib's the FE 61% was identified as being the likely turn around area. This was triggered by the doji bar. This setup was confirmed on the same bar as it was a bearish doji candle. Entry was set to 1 tick below this candle at 653.0. Stop was the high of the confirmation candle at 654.0 for 1 point. Initial projected Fib target was at 649.1 for 4 points. This gave the trade a risk to reward ratio of 4.

After approximately 1 hour the initial target was met. Since this move was not part of an overall trend profit was taken at the Fib projected target.

Net profit: +4 points or 4R

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