SBRY has been in a trading range since around October 2014, with a bottom at approximately 222p and a top at approximately 290p. The stock is currently in something of an uptrend that started in July following step price falls in the run-up to Brexit.
Long Daily Chart
This chart shows this stock bounces around in a reasonably predictable manner inside its price channel (set at this time interval to ±7%). It also reliably pauses, and frequently reverses course, at well-established support and resistance levels. Volume levels are currently at more or less their average level over the period covered in this chart. Volume on the most recent trading day was somewhat weak. This may not be significant but bears monitoring. The recent trend I’ve identified has been confirmed two times now. I am inclined to believe it will continue as I see no signs of exhaustion or an imminent reversal.
Short Daily Chart
I identify two bullish divergences, one in Force Index and another in the MACD histogram. I had considered buying this stock on the morning of 30 September but opted to wait for more confirmation that the uptrend was about to resume. Trading that day has provided me with that apparent confirmation. Force Index is in modestly positive territory while the most recent MACD histogram bar is essentially unchanged from its previous value.
On the strength of the uptrend, I will buy this stock at open tomorrow. I expect the uptrend to resume and bring the price to around 253. MACD and Force Index suggest the price rise will not be explosive. I do not anticipate it will reverse, as such a change in course is historically uncharacteristic of this stock.
I will regard a forceful move below my trend line, to around the 235 support level, to be solid evidence that I have made an error and need to liquidate my position. My money management stop loss will be set to 230.6, per my formula.
Entry: I bought this stock on 3.10.16 at 245p.
After opening at 256.9, the top of its price channel, SBRY beat a hasty retreat down to a close at 248.3. A move like this can signal that a reversal is underway. I have looked way back through the chart for this stock and haven’t found any situations that rhyme well with today’s movement, so I don’t have much in the way of precedent to go on for this stock in particular. However, this stock is fairly consistent about reversing course, at least in the short term, once it has hit or exceeded its upper price channel. Force Index is still in something of an uptrend and MACD histogram is still indicating decreasingly negative momentum (or increasing upward momentum), both of which are bullish. The uptrend obviously still has not been violated, so until that happens, I expect the overall direction of price movement to be up.
After taking into consideration the balance of the signals the current chart displays, I have decided 1) to move my stop loss up to 239, just about two pennies below the trend line; 2) to sell if tomorrow’s open price is equal to or lower than today’s close, and 3) to hang on to my position if the price gaps up around two or more pennies, in which case I will place a limit order at 253 and be satisfied with my profits if that order is filled.
Exit – 6.Oct.2016
Price opened slightly below the previous close and I therefore closed the trade at 247.3 for a gross return of +0.94%. Price hit the level I thought it would (253) and also touched the upper price channel (257) and I am annoyed I didn’t cash out at those price levels. That is, of course, a feeling I only get to have in retrospect, since hindsight is 20/20. Having said that, this stock does have something of a tendency to reverse course quickly. Taking profit with a limit order (or at least placing one after entering the trade) might be a wise exit strategy for this stock in the future.
Price fell quite a bit, down to a close of 232. The trend line has been profoundly violated. The price is now touching the lower price channel and roughly 50% of the price rise over the course of the uptrend has been wiped out. I don’t have any expectation about price movement for this stock for the immediate future. I will keep a close eye on it.