Thursday, August 21, 2008

China Rising?

Was going through the charts and noticed what I think might develop into longer term long trade, suitable for IRAs accounts - once in profit change the stop loss order once a week...of course..."once on the green"
Here is a long term weekly chart of (FXI) iShares FTSE/Xinhua China 25 Index
Grey lines are standard deviation regression channel, red lines - trendlines outlining descending triangle, which in spite of common belief (for beginners in technical analysis or self indulging perpetual bears) of been a bearish pattern, in real life performs much better if broken to the upside.
Note how lower band of regression channel touches latest weekly close, which is sitting right on the lower side of huge triangle spanning over the period of more than a year.
Stop is clear - under 39, of course stop might be taken out if failed breakdown happen, but in this case trade might be re-entered above 39.
If I was trading it (I have NO position in FXI at the time of this writing), I would open 1/2 of intended position now, close to 39 and second half, if so happen, on penetration of upper side of triangle. This way my initial loss would be limited to whatever loss I will have on 1/2 of intended position, and if it moves up and second 1/2 is added - it gives a chance to widen up stop to slightly above of "(high price - low price)/2"