Saturday, December 6, 2008

A trade that worked and one that didn't

Yesterday I made two trades on DIA. The first trade was based on a bear flag that appeared around 11:30. I saw it developing and placed an order below it anticipating some dojis and a bounce off the 20EMA. Everything went according to plan, but things quickly reversed on me, and I stopped out around noon.

I had noticed the momentum divergence (MACD chart with yellow line) but I ignored it believing that there was no way the market could make gains after the dismal jobs report. Of course, whenever I assume something, I always get kicked in the pants. You would think I would have learned my lesson by now. Nope.

The second trade bailed me out. This time I paid attention to the divergence and bought at the moving average crossover a little before 2:00. I held on to near the close for a decent 2.34R gain.

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