The Double Top Play - A Rally into
The Double Top Play: A Rally
into Resistance. CYMI has rallied very
impressively over the past three days; however,
this rally has brought the stock into an area of
major price resistance. While another up day
could very well materialize, the prior high
formed in late November will serve as a
troublesome area for the stock.
chart courtesy of
Tip: Prior highs
represent areas of pain for those who bought
near the high previously, only to see the stock
decline sharply before finally rebounding. The
battered traders who suffered through the long
wait in stock to get their money back are
extremely likely to sell now that the stock has
revisited their initial entry area. This is
partly why prior highs often serve as major
price resistance, which sets up the much talked
about double tops.
Look to sell short once it trades below the low
established in its first 30-minutes of trading.
Once entered, place a stop $.25 above previous
day's high or above the day's high, whichever is
higher. Note: Keep in mind that a gap up at the
open will not necessarily invalidate this play.
A gap up will be viewed as a "last hurrah" move
to which you can apply 30-minute
sell rule. A gap down, unless it is too
excessive, will also only confirm expectation.
A $2.50 plus move back toward the stock's
20-period moving average.
CYMI hit 30-min. low entry
and immediately reversed direction to trade back
above the day's high resulting in a $1.86 loss.
This has been the type of intra-day volatility
within the market at this time.