Transition to Stage 2 Breakout

Trading Strategy: Transition to Stage 2 Breakout. Here is the hourly chart because the daily incorrectly shows the bearish gap down. The hourly chart, however, shows a Climactic Buy Setup (CBS), followed by almost two days of narrow range basing. This suggests that the selling is exhausted. Previous day it made a new low; however, there was no follow through to it, and it closed with a Bottoming Tail (BT). The next hour's candlestick was a bullish engulfing bar on Increasing Volume (+Vol.), from which it based into the close and made a higher low. You can also see the very oversold condition and far distance from its 200MA, suggesting a snap back. Because the hourly sold off in a "clean V" fashion, there is very little supply to halt the advance if it breaks out, giving us a great reward-risk trade. Although not shown, the daily chart closed with a Bullish Changing of the Guard (+COG).

chart courtesy of

Tip: A breakout from a base following a CBS acts as major support to propel the retracement.

The Play: Buy over previous day's high, with a protective stop under previous day low.

Objective: $1.00 to $1.75 move. MEDIUM RISK

Play Review:

NWL stopped at $23.36 (prior low after two full days of trading) for a $.09 loss.