Seeing RED

One of my normal prep tasks each morning is to review stocks that are making unusual moves (up or down) in the Pre-Market. One opportunity that presented itself today was GDI (Gardner Denver Inc.) as it had a solid earnings report and had gapped up. What really got my attention at the open however was the RED volume bars. And I mean massive RED volume bars on the 5m chart, one after another.

I went short with an average of 85.24 and rode it down to 82 (my 1st target, posted on twitter) where I covered my 1/3. I then assessed the chart and volume to determine the next point for covering the short. I chose the 81 level for the covering the next 1/3 of the position.

Now comes the hard part – finding the “bottom”. There is no exact science to this, some of it is a “feel” for the chart, while some of it is purely a technical support level. I noticed a tightening of the candles as it approached 80 and then watched it breach that level for a moment. I elected to cover the remaining at 79.80 level.

Now what?

Back to watching the volume and I notice several GREEN bars forming. Time to go long? Relief rally? Dead-cat bounce? All of these are thoughts that had to be assessed. I went long on a strong move back over 80 & continued to monitor the recovery / retracement. I further felt confidence in the new long position once it reclaimed the 20 day moving average on the 5m chart.

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