So today, the formation crashed, and BVN stock plummeted nearly five percent. Generally, I like to wait an see if the stock closes beneath the stop level. In this case, the level was 41.67. However, my emergency stop, placed under the next support level at $40, was activated, causing a large loss.
The trade was risky from the start, with only a 36% chance of an upside breakout from the descending triangle, so it would have been wise only to enter the trade partially, and then finish the entry on a definitive breakout.
I'll make a note for trades from this point foward.
Entry: 42.62
Exit: 39.85
6.5% Loss
I will look for a new trade later tonight as this market turns sour.
~Christopher Diodato
So is this entire wave/trend done with now? I'm assuming BVN broke down and sold off because of the entire commodities pullback that's occurred over the last several days. Is there any chance that once the the slight pullback in commodities is finished that the wave will resume, meaning put this trade back on as initially described. (PS: I have zero knowledge of Elliot Waves)
ReplyDeleteWell, I would not go there yet, since according to Elliot, this is a false breakout. I would have just preferred to take a loss now than to see another downswing.
ReplyDeleteAccording to the studies by Thomas Bulkowski, the probability of success when buying during a descending triangle formation is around 36%, however, if you buy after it breaks to the upside, the probability jumps to 84%.
Therefore, yes, you may be correct. However, I am now waiting until the upper trendline of the triangle is broken before I buy back in.