Bulkowski's Noven Pharmaceutical Trading Quiz

Price has broken out upward from this symmetrical triangle.

Here's my notebook entry for the trade.

"Date: 5/18/05. Filled at: 17.44. Stop: 15.53. Upside target: 21, site of old resistance (March to April 2004) and a gap in Nov 2004 (21.30 to 22.06). With luck, this will complete a Big W out at 24-25. Future S&P direction (guess): Down as it's hitting overhead resistance. That might force the market to take a closer look at drug stocks, like this one. Flight to safety...

Buy reason: Upward breakout from a symmetrical triangle. The knot of congestion during the past week at 17-17.65 also signals a buying opportunity according to Schwager."

This chart shows the trading landscape as I saw it on the day I placed the trade. The Big W price target is in green. On the way, there's overhead resistance and a breakaway gap to push through first. I show the stop location in red, placed a few cents below the minor low. The congestion circled in green is a positive sign. Will it portend a winning trade as Schwager says?

This is the general market and it shows overhead resistance. How did the trade do?

This is the day after I bought. "5/19/05. Stop raised to 16.23, just below the 62% Fib retrace." I must have thought that the stop was too far away. The Fib retrace is 62% of the A-B distance.

7/22/05: I extended the expiration of the stop another month." The red line shows the price level. My broker places an expiration date on the stop loss order, which I renewed for another month. The congestion zone is circled in green. Price has trended down after the upward breakout.

Question: is it time to sell?

I didn't sell because there was no reason to. My stop wasn't hit and I wanted to give this stock every opportunity to move higher. However, on the last day shown above, I became nervous about the stock. I canceled the stop order and manually timed the exit. Here's my notebook entry.

"Date: 8/19/05. Filled at: 16.557.

Sell reason: Downward breakout from right-angled broadening wedge, ascending. I tried to time it but would have done better if I sold it at the open in a market order."

I sold before the decline really got going and saved myself some bucks. I lost 5% on this one.