Bulkowski's Southwest Airlines Trading Quiz

The HCR is a horizontal consolidation region isn't horizontal but if you take a chainsaw and cut the spike on the bottom and the few on the right edge, it's nearly flat. The flag (center) is a flag but not one I'd trade because it doesn't have a vertical flagpole. It's more of a HCR -- a support or resistance zone. The RABFD on the right has broken out upward. It then threw back but is now heading higher. That's the buy signal.

Here's my notebook entry for the trade.

Date: 6/9/2004. Filled at: 15.81. Stop: 14.27, 9.7% away. This is just below the low on 4/21/04. Upside target: 17, using height measure rule: 15.30 + (15.30 - 13.56). Mood (will trade work? Bought too soon?): Cautious. Other airlines are moving lower, so I don't really trust this one. Long term, I think the price is a good one. Short term, who knows? S&P direction over pattern lifetime: Down. Future market direction (guess): Dow transports will stall soon as it reaches old high in January. S&P same: Up but will likely stall in the coming days as it matches late January peaks.

Buy reason: Throwback from RABFD completed and oil prices are trending down. Since most of the fuel is hedged, the price won't make much difference. If the stock can push through the HCR (flag in Dec '03), then this has a chance of moving up.

Stops appear as black dots at the time and price placed.

6/21/04: Stop raised to 14.87. 6/28/04: Stop raised to 15.41

7/13/04: Filled at: 15.41. Mood (sell too soon?): I expected this because the last 2 days the stock neared the stop. Not upset, just disappointed. Sell reason: stopped out. I should have sold when the stock jumped up 5% in one day [that's an event pattern I call an inverted dead-cat bounce]. Oops! Instead of taking a 4 digit profit, I took a 3 digit loss. The good news is that I raised the stop loss to cut it to 2.5%.