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Clay starts off the webinar today about what a nuts alert or Christmas tree alert. It is a scanner that he uses that shows tickers making new highs or new lows and when there is a flurry of them his scanner lights up green or red (hence the name). Clay likes volatile tickers and these usually make some very overstated moves that set up some nice RvR trades for him.
Today we take a look at MDT on the 5 minute chart. After presenting the chart candle by candle, we try to find a candle that would imply a potential downturn. We get a wolf candle which also coincides with the top of a Bollinger band. You also having it occur at a grandma number. After discussing logical locations for a stop loss and what rules we should NOT break, we discuss what would be considered a logical support.
We also set up a long side trade. It’s pretty cool to see that most people’s entry for the long side was there target for their short side trade (which makes perfect sense). Previous resistance turns into support. If we want the stock to go down, it would be logical that it would bounce from that location. At the same time, that would make for a logical location to go long so you can see here that you could essentially setup two different trades.
As the chart progresses we see that it does make a pullback as we anticipated in the beginning of the short trade setup. After 5 candles it almost reaches our target to the penny. Now, some people who were going long have most likely entered. This trade also takes very little heat and moves to its logical target. Clay hammers the point that it is IMPERATIVE to trail your stop because there is no way to know if the chart will just keep going on your favor much further than you ever thought (which would wipe out many many many small losers).
A good point to end on is that when you are fighting the overall trend you need to be AGGRESSIVE in your profit taking (since you’re fighting the river). When you’re entering a trade with the overall trend you can be much more conservative because you are ‘going with the flow.’