Options trading at Netpicks is a big deal but there are times when some traders may want to position in the actual stock.
Today, I am going to look at CRM (Salesforce) and BABA (Alibaba) because they could be presenting a trading opportunity.
Being up against resistance gives us a few events we can trade.
- Price could reject at highs and then fall to fill the gap
- Price may breakout to the upside
- Price could form a trading range under resistance (generally a bullish event)
If price were to break to the upside or base under resistance, a price target of $308 could be a goal.
Downside would be a play to the gap.
The way to trade these is to look for a trading trigger. Trade triggers depend on the trader, however:
- Look for price to poke through highs and then collapse. Selling would be under the reversal or using a lower time frame
- While basing under resistance is bullish, if we see price ranging at the support of the base, we could be eyeing a downside play
As for upside, there are similar methods to trigger your trade entry:
- Basing under the level and a failure test of the support of the base (range)
- Breakout pullback entries and for those, looking at an intra-day time frame such as 15-30 minutes, is the best best
The secret is, if there is one, is to play for the scenarios and then play the one that shows up.
Your stop loss is wholly dependant on your risk parameters but a short trade would use the high of the reversal. Consider ATR type of stops to use market volatility.
Price is recovering from a pullback and is currently sitting at a point of decision.
This rally is similar to the one just before the low so it could be expected to fall back down the prior leg. Not a short trade I would consider simply due to price formation that looks like a possible forming range. Having a mixed trending structure is a sign of a trading range. An example price progression would be:
- lower high
- lower low
- higher high
- higher low
- lower high
However, looking for price to make a move out of this zone is a possible play. Of course we have to be mindful of highs but price were to break higher, I’d be looking for a price target of $298.
Goals Are Bigger Picture
The price targets are taking into account the larger price structure and in the case of CRM, it’d be the pullback length that occurred.
It is expected that every trader would have a way to manage their trade as it makes it way to targets.
To wrap it up, we need a trade setup. After the setup occurs, we need a trigger to get us into the trade. Then, we manage.