Welcome to another edition of 100 Dollar Club – the purpose of these case studies is to review the fruits of hard labour – and the best fruit is that initial taste of a winning trade, which I like to call, “$100 Dollar Club”, when you make your first $100 dollars.
This trade took 9 days to make it’s first $100 profit … not bad! But to be honest, this was a tricky setup. Firstly, I love the narrow band; you can see how the price touched the top and bottom of the channel. Also, the trend going into this band was textbook – each of the lows touching the trendline.
But what’s so tricky then? The trickiness comes in the whipsaws within the channel. You can se the fake breakout at (1) in early 2018. Which many would have taken as a solid entry trigger – broke out of the resistance level and maintained some days before retracing back into the channel. And should you have taken this breakout signal, you also would have been shaken out of this trade because shortly after the fake breakout, the stock fell through the mid point, and then broke support. For many of us who use automatic stops, failure of the support would have triggered execution of the trade!
The only reason I didn’t enter the stock in beginning of 2018 was probably because I didn’t find this chart setup till March or April.
My entry was nearer to the end of May. And being a little more conservative, I chose to wait for the price to breakout above the high of the January fakeout.
But always remember, making $100 bucks is good, but always keep in mind the 3-step system:
- Pick a great company
- Wait for a setup and breakout
- Exit when the trend is broken