The Metastock chart below has been divided into four zones of price action by four perceived horizontal support/ resistance levels.
Of the four, only zone 1 could be regarded as constituting a conventional trading zone with about 6 months of side-ways price movement between support at S27.90 and resistance at $29.60.
In Zones 2 and 3 the share-price is trending , and transitional between zones. Zone 4 contains the peak price action after a strong upwards surge and was followed by a dramatic reversal of trend.
It is more profitable to trade trending across two or more zones if possible than to just capture price fluctuations within a single zone.
This was my objective in purchasing a parcel of shares for $29.182 on the 28th March 2018 after an uptrend emerged within the trading zone (Zone 1). This was followed by a strong impulsive move higher which has penetrated resistance at $31, taking the share-price into zone 3.
After a succession of mostly positive candle-sticks in the past month, today’s trading is depicted by a small negative candlestick with tails above and below, suggesting some ambivalence in the minds of traders. The RSI is bordering on the overbought zone.
Whilst this is most likely to be just a pause, before resumption of upwards trending, I expect that there will be others like me who consider this to be an opportunity to take some profit, with weakening of the price perhaps back into Zone 2. I have therefore sold off 1/4th of my holding.
If the price does retreat I have the option of trading around an approximate median range level of $31. My intent is to then accumulate stock at prices less than $31, and to distribute stock above $31 until such time as the previous high is exceeded.
Readers of this post are urged to not base their decision making on technical grounds alone, but to always seek the advice of their financial advisor or broker, when in doubt.