A good example of losing perspective due to exuberance was my GLF trade (Figures 13.1 through 13.3 ), which did not go well for me. However, I learned many things from the interaction of longs who were panic selling, shorts who were covering, and new buyers who were jumping in with both feet.
GLF, daily, indicator set #8. Characteristics of the trade set-up: • False downside breakout. Impulse changed from red to blue, accompanied by a bullish MACD crossover (bar A). • Gap into the value zone, changing the Impulse color to green (bar B). • Four days of consolidation ensued (B–C). • Bullish engulfing bar closed at the high of the day on strong volume (bar C).
GLF, daily, indicator set #8. Progress of the trade: • Stock opens and takes out the previous day’s high (bar A). I was filled at 25.20. • Prices fall out but recover the value zone at the end of the day (bar B). • Prices open and deteriorate, dropping to a new weekly low and changing the Impulse from green to red (bar C). I was stopped out at 24.59, for a 2.4 percent loss over three days.
GLF, daily, indicator set #8. Sequence of events following the earnings announcement: • Stock gaps ...