Click on the chart to enlarge it.
Remember that this trade entry was originally predicated on the monthly bar chart and that we dialed down through two lower timeframes to finesse the entry.
Because of the magnitude of the driving time frame my inclination is to use the NMA (magenta line on prices) as a trailing stop to exit the trade. That might be a little too loose for many traders, so an alternative would be to use a close (or 2 closes) below the Fast NMA (green line on prices) as a tighter stop mechanism.
The first close below the Fast NMA occurred near the end of March, 2003 (arrow under prices). However, note that at the same time of this moving average violation another NMC ZeroHit buy setup had formed (with an entry signal the following bar) and this was occurring with yet another NMM ROC Slingshot formation.
This confluence of signals would be sufficient to nullify our potential exit. Thus I often recommend demanding two consecutive closes above or below the Fast NMA: If a setup develops when prices are near the Fast NMA we don't want to be knocked out of the trade just as an entry is being signaled.
In a market being driven by such a high timeframe signal, if a tighter stop is employed (Fast NMA) I also suggest having a solid re-entry technique to get back in and avoid missing the potential for further trend. A lower timeframe Ocean setup can function extremely well as a re-entry technique in such an event.
(This is the end of Part 7. Go to Part 8.)
|
