4PM trade ideas
How to Trade the Breakout of a Breakout, with Philip MorrisHi all,
Here's an idea which is about Trading the Continuation Breakout of a Continuation Breakout.
Yes, it might sound confusing in the first read. To be precise, this is about capturing a Short Term Breakout move, in an environment of a Longer Term Breakout that is currently in progress.
1a. Between March 2009 to Oct 2012, Philip Morris (PM) has been trending well in a snake-like manner, slithering from 35.00s to as high as 93.00s during this period.
1b. After Oct 2012, price took a break and consolidated sideways for a considerable among of time, about 46 Months. Basically, the price has been messing about between 95 - 75 , zigzagging within the zone and forming an Ultra Large Wedge Consolidation pattern.
1c. On 17 Feb 2016 , price broke out of 90.00s , out of the 46 Months Wedge Consolidation zone and has pushed towards 100.00s recently.
Point No. 1 is for us to recognize that price in an overall Bullish Environment, with price in a long-term break out phase.
2. After price broke above 90.00s to reach about 102s , it did a smaller sideways consolidation, in a form of a classic Flag pattern. As of 07 Jul 2016, price has managed to close above the Flag pattern, confirming that a short-term breakout is taking place.
3. Coinciding with the Flag Break Out mentioned in 2. , we also observed a legitimate Elliott 5 Wave pattern in the process of completion. All 4 waves have been accounted for and the Flag break out in 2 . is also the 5th Wave in the making.
4. There are further technical studies which also supports the case for a breakout. One study is to look at the RSI (14) , where we note that RSI has "bounced off" a support level. Another technical study, which is not illustrated here, is to look at the Parabolic_SAR (0.02, 0.02, 0.2) , which is indicating that price in the upward phase.
Projection
Given:
a) PM is operating in a Bullish Environment and is also in a long-term breakout mode,
b) Price has broke out of a short-term flag pattern
c) Price action is also exhibiting a classic Elliott 5 Wave formation
d) RSI is bouncing off support and Parabolic_SAR is giving off upward phase signal
We project that the price is likely to move strongly upwards in a breakout manner.
Entry: Anytime from 11 July 2016, at a price no lesser than 102.00 and no later than 13 July 2016.
Stop Loss: Below 101.00. Should price trades below 101.00 , then the Flag pattern has failed and the position should be closed without hesitation.
Taking Profit:
There are a few ways to take profit, depending on the individual profile of the trader. This is because there's a long term and short term breakout pattern at play here.
Short Term Players can look to take profit at around 108.00 levels. Alternatively, they can look at RSI as a profit taking guide, especially when it is approaching the RSI resistance level of 78.000 s. Long Term Position Managers, who patience and can stomach the pullbacks, might want to consider profit taking around 116.00 .
Shifting of Stop Loss:
Once the price has reached around 106.00s , it might be prudent to shift the stop loss to breakeven level, to reduce the risk of loss to the lowest level.
Risk:
There is a risk that the upcoming Earnings Release on 19 July 2016 may negatively impact price significantly, resulting in a loss. Also, all breakouts face the risk of failed or being caught in a bull trap.
Summary:
A Flag/Elliott breakout is occurring in Philip Morris (PM), in an environment of a longer term Wedge breakout.
PM 87.73 bullish – 2.5-year triangle breakout points higherPM 87.73 bullish – 2.5-year triangle breakout points higher
PM broke out of 2.5-year triangle resistance (as shown on the weekly chart) to post new year-to-date highs. Bullish momentum suggests further upside towards 90.25 (November 10, 2015 weekly high) and then 91.63 (June 16, 2015 weekly high) near 76.4% of the 96.73/75.27 fall. Above there would open the 96.73 record high (April 29, 2013). 85.89 (October 16, 2015 low) which is the breakout point and 200-week moving average (black line) should provide immediate support to hold dips. Below lies the 83.79 low (October 12, 2015).
Outlook:
Daily: bullish
Weekly: bullish
PM looking to add to existing shorts | Risk : 0.94
| Stop : 86.55
>1=ok 0=n/a or no | Pivot L/H : 85.75
| ATR : 0.95
| Stock : PM
| Days to Earnings : -48
Fundamentals | Approximately,EPS Due Date : 10/17/2014
IBD | EPS Rating : 66
IBD | SMR Rating : n/a
Whale wisdom .com | 13F shares % change: : 1.00%
Technicals | Horizontal S&R : 1
1=ok daily .6=ok 60m 0=no n/a=waiting | Channel S&R : 1
| MA S&R 20MA=.2 50MA=.5 200MA=1 : 1
| Pearsons R >87 : 0.81
Setups: T1=flag T2=double bottom | Price within Fib Ret..62 : 1
T1 Osc -1.38 | : 1
T1 Fbar Stoch turn / crossover >= 80% | : 1
Stoch have not yet crossed 50 | : 1
strong=1 neutral=0 weak=-1 | Stock XLT : 0
strong=1 neutral=0 weak=-1 | Group Leaders / Industry XLT : 0
| Group Leaders / Industry : lo + mo + pm
b=buy s=sell d=daily 60=hr | L / S / Strategy / Time Frame : s t1 d
| Symbol : PM
| Trade Rating : 72%
| NOTES : Already started a very small short position in PM and RAI a few days ago. Will add if 60m form a bearish pattern. Otherwise will just allow trade to either hit stop or time stop.
PM tight pattern gives calculated entry After V-shape move off the bottom on February, stock formed double top at $91.62 and sold off from there with two gap downs (means strength of sellers). I will us gap pivot point as stop/ Until it stays below $87, I am bearish. Price is below key moving averages. You can manage this trade in different ways I use active trade management. Enter with tier1 in this tight pattern, add tier2 and tier3 if it breaks down and close below $83.83. My road map is move to $79.
