Newell
Rubbermaid's forming Descending Triangle
Newell has been
forming a Descending Triangle pattern since December
12, 2007. Although the triangle has not yet broken
down, any close below $22.10 in the near future will
signal a break down from this pattern. If NWL closes
below $22.10 within the next 5 days the break down
will be within the 2/3 to 3/4 triangle range and that
signals a more reliable indication that the pattern
will work. A descending triangle is a measuring pattern
which indicates to what point the stock should trade.
Measuring this
triangle;
26.21 - 22.35
= 3.86
22.35 - 3.86
= $18.49
How to
play this Descending Triangle;
1- WAIT
until it breaks down) The triangle has not broken
down yet so you need to wait until it does. The triangle
breaks down after the stock CLOSES (this is a daily
chart after all) below 22.35 - and to be safe you
want the close to be below the trading lows of the
previous range which is $22.10.
2 - Get
your shorts on) Establish a short position after the
close below $22.10.
3 - Protective
Stop) Place a protective covering stop at 22.46 (very
conservative and maybe a little tight) or just above
the blue downsloping trend line which is at approximately
$23.50 right now. Remember, this line is sloping downwards
so this price will decrease every day and your stop
can be tightened as the line draws this level lower.
4 - Taking
a piece off the table) The target price for this move
is equal to a 17% move lower in this stock. This is
a large percentage moves so after into this trade
for a decently profitable amount take some profits.
Your call here, but I would take 1/3 or 1/2 the short
position off once the stock trades down to 21 and
then lock the rest of the profit in by moving the
protective stop for the rest of the position down
to the entrance point for the trade.
5 - Exit
the trade) A weak market will give you an indication
if this pattern is going to trade all the way to its
measuring price. Once the stock trades down below
$20 move your protective stop down to $21 or lower
depending on the patterns formed subsequently by the
stock, market conditions, news, etc...
To learn more about Descending Triangles
see Stock Trading Cards T14, T15 and T16 and watch
Lecture 4. Visit www.StockTradingCards.com
~Robert Perrego
Disclosure –
no current positions in NWL.
3/8/2008 5:51
PM
