Aug 20, 2007

Rise or Fall - Revealed

Stock: KFN
Bottomline: KFN was a great countergap trade candidate and if you were thinking short at this point, you'd be correct.
Did I enter: No, I decided early last month that I would stick to trading the direction of the gap for the summer.

What I liked:

  • After gapping up, price proceeded to drop below the 50% fib. level
  • The 10:10 bar is of particular interest as it closed below the 61.8% fib. level, was an offsetting bar and - most importantly - was an inside NR7 bar. I mentioned in this post that I will be actively looking for inside NR7 bars at the 61.8% and 38.2% levels
It's important to note that the low of my entry bar was not broken on the next bar which would have also prevented me from entering. I'm still debating whether this rule should be broken during consolidation periods. Meaning, if I see an inside NR7 at a key area... maybe I will wait to enter when the high/low is broken and not solely on the action of the following bar. I'm not a big fan of breaking rules when it comes to my system.

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