When trading against the primary trend, there are a few things we look for to define our risk and raise our probability of success.
We outlined them in a post a while back, but they essentially boil down to the following:
- Our downside price target has been met.
- Prices undercut that price target and quickly reversed.
- Momentum diverged positively as prices made a new low.
- Prices are very extended from their mean (200-day moving average).
- Quick follow-through confirmed the supply/demand imbalance.
- Short interest in the stock (not required, but amplifies move).
We are now seeing a few potential opportunities given that stocks have been hit, some harder than others, over the last few weeks.
Here’s Reliance Infrastructure quickly reversing off our downside price objective near 100.30 as momentum diverges. As long as prices are above that level, we can be long with an initial upside price objective near 140.
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