Earlier this was known as Tata Tea.
Trade Exit Date : 7/10/2010
Options : Call
Strike Price : 130
Bought 1 Lot.
Pattern : Swing Trap Pattern
This is more famously known as ABC wave (Elliot Wave Theory).
On seeing the hammer in the marked area, a lot of traders are deceived to feel that selling has stopped.
But this is a swing trap. This wave doesn't go as high as the previous one.
And now when it falls again, a lot of traders have to take a loss. The black hammer in the focused region just shows all the stop loss orders that might have got triggered before buyers pushed prices back to near the day's open.
Now that all the sellers are gone, this stock can rally. And boy, did it rally.
I entered this trade a bit later for many reasons.
1. The liquidity in Options was not very high just after the black hammer day.
2. The sellers were all quoting very high prices, since the time value of the option was high (beginning of the month) .
Ideally, since this was the breakout wave, I could have held on my position a bit longer. But since Options contracts lose value in time, I just took the profit taking decision, and took pretty decent profits on this one.
But there is still money to be made in this stock for now, as its still in the breakout wave. Watch the stock for a pullback, and see if this can be a profitable trade.
Update : I planned to re enter again in the third wave. But got stopped out as the pattern broke down from there. The quarterly results that were announced also didn't give enough trigger for a major rally.
No comments:
Post a Comment