Michelle B submits: In the film, The Object of Beauty, when the hearing-impaired hotel maid was asked why she stole the valuable, small Henry Moore sculpture from one of the hotel’s rooms, she replied that it spoke to her. The pattern VCLK set up this past Thursday spoke just as eloquently to me, and I suppose you could say I stole a trade.

After the close on Wednesday, November 1, I noticed VCLK on the high scan and placed it on my chart pages, and then retired for the night shortly after—the market closes at 10 P.M. my time. During premarket the following morning, I did my basic research on it: reason for the move, float size, short interest, and support and resistance on various timeframes. At the open, it gapped up. Then, it pulled back sharply and filled the gap. Suddenly, eager buyers stepped in, and it reversed back up on substantial volume and made new fifty-two-week highs via a strong morning upleg. This action told me buying interest remained strong, and the chances of VCLK triggering a long daytrade later on was high.

As I flipped through my chart pages—all set at 30 minutes timeframe—during the morning, I would spend additional time watching VCLK’s price action via the one-minute timeframe. Eventually, I could see the development of a bull flag—a bull flag as perfect and beautiful as a bull flag can be.

This lovely pattern was not just another pretty face, it communicated clearly to me essential information. It said the bull flag was forming slowly, shallowly, and long enough to give the buyers from the morning upleg an opportunity either to book total or partial profits at a good price, and that new buyers were not very demanding price wise because of their eagerness to get a position in VCLK. This type of consolidation pullback resulted in no trapped and panicky buyers because it remained reasonably close to the intraday highs.

In addition, it said that the length of the bull flag was sufficient to support an additional upleg via a measured move—the shallowness was compensated by the time it took for the exchange of old buyers to be replaced with new ones. There was a high probability eventually the gentle booking of profits would end, and the eager buyers would have to accept higher offers to get a position, causing a second upleg.

Instead of relying on a thirty-minute, narrow-ranged candle to enter, I used the one-minute chart for the basis of my entry. I was watching for VCLK to pull back to intraday support at 20.70. I waited for that level to be tested. It held, and the price went up to the next resistance level at 21. Then, I entered a buy limit just above the closest support level at 20.87, near the 50 simple moving average. The stop loss was just under the pullback lows at 20.70, and the target based on a measured move was around 21.70 to 22.

My bid was hit, and the price went down a few cents before it proceeded to consolidate within a tight range. Once it broke out above the resistance at 21—I was carefully monitoring how it acted at this resistance level—it started to do the second upleg. Note just before the equilibrium between supply and demand tilted to the demand side, the volume almost came to a halt. I fondly refer to this ramp after a lull in volume as a lullipop which was cleverly coined by a trading buddy.

Also note that an additional lot could have been purchased via an automatic buy stop once the resistance at 21 was cleared. Since the price action from the open was setting up a high probability trade, I decided to anticipate a breakout, keeping my stop loss fairly tight, just under the pullback lows. But a style combining both anticipation and confirmation/reaction to the breakout could have used—see a previous trade. And of course, a pure confirmation style could have been used, with only buying once the 21 resistance was taken out.

After the resumption of the intraday uptrend was strongly in place, I set a hard trailing stop of .18. My net connection has been quite wonky lately, going down at hours at a time, and I wanted my paper profits to be protected in case if my net service was interrupted. My target was also a range from 21.70 to 22, so a trailing stop could possibly result in a better gain then if I set a sell limit as I usually do at a precise price—the trailing stop of .18 was .12 less than the targeted range. The trailing stop reached 21.39, and when the price touched 21.41, it was triggered. The early triggering of a trailing stop happens occasionally. However, because of the eagerness of buyers, my trade was closed with positive slippage at 21.47. For a risk of .20, the reward was .60, so a 3R trade, lasting about an hour and a half hours.

VCLK continued to 22.20. Did I feel perturbed that I left a R or two on the table? No. Because it was a high R trade, so what’s a few R’s among friends? That is why it is smart to plan at least a double reward to risk, because sometimes R’s will be left behind to no fault of your own. And in this way, you can at least book the same amount of reward to risk. It was a good trade, and I was pleased with it. Trading tools can be unreliable at times. And certainly, if I did lose my net connection, I would have been very happy that my profit would have been automatically booked.

(Ed: My bad for the delay in publishing this. Mike)