Trade Both Sides of a 15-20% Trading Range in BAC
One of the first lessons that we are taught when learning to trade is that markets either trend up, down, or sideways. When in a trend we are taught to enter on pullbacks/rallies within the trend, and in sideways markets we are taught that we can trade both long and short. This may turn out to be a good example of trading both sides in a sideways stock. BAC has traded sideways for the last 2 years that equates to a range of about 15-20 % of the stock price. Currently there is a breakout of a descending channel within the larger sideways channel (we missed the long entry on the bottom of the sideways channel back in Sept and Oct), so we enter on the pullback after the breakout, an entry should come over the next week or two, then hold until the stock reaches the top of the larger sideways channel (blue). We can then reverse our position and go short and ride price down to the bottom of the channel (red). This exact scenario has already played out twice in the last 2 yrs. Another lesson that we are taught is to trade with the trend (whether up, down, or sideways), the current trend is sideways, so we should continue with trades that profit from this sideways movement until the trend changes.
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