Chapter 11. The Harmonic Trade Management System

I want to review the trade that forced me to create this system because it was a real heartbreaker. It probably was one of the greatest moves that I’ve ever missed. The stock: Redhat—RHAT! I remember thinking before I entered this trade that the symbol alone was a sign of a bad trade—a dirty RHAT! I thought that it might be a loser, despite the overwhelming harmonics.

The trade involved a nice bullish AB=CD at a critical 0.618 retracement that defined the area just under $75 as significant harmonic support (see Figure 11.1). Despite my apprehension for the symbol, I placed my trade. I bought 1200 shares at 74 3/4. Within a day or two, the stock rallied vigorously. The stock moved sideways for ...

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