LNR - Linamar update

For any interested in LNR it made it to a low of $15.35 and closed today at $15.56. This may establish the new lower trend boundary.

Note the following points - history:

• blue arrows indicate the price touching the new trend line


• the last two (yesterday and today) bounced right along on it


• the 50SMA (pink moving average) corresponds with the new line


• the MACD is moving up and will intersect the green momentum trend line this can act as confirmation more than indication, lower red circle (keep in mind MACD is a derivative of the price and represents a following trend so getting to know the chart without it is a better long term plan...more on that another time perhaps)

Entry point:

The upper red circle contains the entry point for a long position, I will watch it closely on Monday and perhaps trade on Tuesday. Monday could be used but the odds aren't as good without one more day of action right above the trendline to confirm the entry is good. I like to see a reasonable bounce first.

Target:

The upper trend line has not been established yet so there is no defined target yet. The upper blue line now only indicates some price highs. The trend line will most likely end up parallel to the lower line which places a possible target at $19.50...almost a $4 max profit. That will not be known until the price peaks and starts down.

The red horizontal line is an historically significant support / resistance line and COULD hold the price below $17.75 as it did on May the 9th. Minimum target is $2.25

Stop:

Set for $15.25, approximately $0.25 under the trend line, buy in may be as high as $15.75. Max loss is $0.50 per share

Profit / Risk ratio:

So P/R ratio is between 4.5:1 and 8:1. Either is acceptable even excluding that I have decent profit already on this stock.

Strategy:

• Enter the position early next week.


• Leave the stop wide enough to let the price move as it may hover under $17.75 as it did in May, perhaps only as high as $16.50 until it crosses


• The lower trendline and the 50 SMA will eventually squeeze the price to the line


• aggressive trading would follow that lower trendline with a stop just under


• conservative trading will hold it closer to take a small profit if the price pulls back from the line


• Worst case is the price drops and a $0.50 per share loss is realized...always know the worst case...actually the real worst case could be that the price gaps down to $14.80 or so which jumps past the stop and sells at the lower price...it is possible due to the gap up from that price in early may. I think it very unlikely but worth mentioning.

Should anyone be brave enough to try this or any other trade that I outline I wouldn't mind hearing about them. I wouldn't post this unless I seriously was going to follow my outline...keep in mind that conditions may change between now and the actual order that may have me not trade the stock and I may not post that fact until after...so you do take your chances, do your own due diligence...whatever that is for you.

JD.

Today's game update, LNR deconstruction

Ahhh...the stats are not looking as good today. My three positions are pulling back a bit (or rallying in the case of the short trades). I widened the stop on one to give it more room for tomorrow's movements, although I don't think it is needed I don't want to lose the trade for the sake of a few cents.

I decided to can the EFX/UN trade altogether as it really doesn't fit my plan and the target is not really all that large unless I wanted to hold it throught the next intra trend pullback (the price usually drops after each successive climb, this is called a pullback, the price going up is a rally).

I do like the setup for SW so I will watch it and buy some shares if I still feel comfortable with the potential.

LNR regained some of the lost price but is still looking like it may continue down slowly or it may rally up after establishing a new low for the lower trend boundary to be set by. I am keeping my eye on this one to see which way it goes to re-enter a trade when the time is right as any stock traded successfully is worth watching for another good trade.

This is a four month chart that shows the important timeframe for the trend reversal, prior to this the price was falling then formed this nice curved shape, the teacup. I could have been bought anywhere along the bottom red line but I didn't get in until the last days of April. I could have seen up to $1 more had I been watching this one earlier...but I wasn't. I think that I bought it the same morning as I found it as the pattern was just to classic to not trade and, in hindsight, it fit my current plan nicely.

Notice that once the red line is started mid-March that the price lows follow the line very closely as if they were bouncing off of it. It only took two weeks to establish this line and it held as a line of resistance right through.

Also worth noting, the upper horizontal red line was established in late 2005 and has been significant three times since not including the brush on May 9th.

The "handle" that has formed over the last weeks is also a classic part of the shape but it doesn't really indicate which way the price might go next. The purple line was my stop setting. The green line is the Trend Within a Trend (TWT) line for the small downtrend. The blue right hand boundary line is still moving as the price continues horizontally...once the price breaks up the line stops moving as it remains touching the last low price.

Should the price break down then I would have to wait to establish the new trend lines.

JD.

LNR - Linamar

I sold my shares of Linamar today. The price dropped to my stop setting and sold.

Realized profit for the trade: 16.3% net

Duration: 5 weeks and 2 days


I re-plotted the trend lines to see if there is a good re-entry coming up. It appears as though the last two weeks were a very shallow downtrend, which I realized but never plotted. I still would have left the stop where I did as I could have sold two weeks ago for 23% and chose not to. Looks like it's time to wait this one out and look for another stock to trade.

I won't post the chart tonight but it looks like it may continue up after finishing with this little consolidation phase...basically the price action remains mainly horizontal while traders re-position themselves, kind of an equilibrium. There was a rather large jump in price in one day a while back and a previous long consolidation and shallow uptrend. For those who follow the MACD (I'm not going there in the posts yet) it displayed a classic positive divergence pattern that pegged a good entry point almost anytime in April. For pattern traders the cup and handle is now pretty much complete so we need to see where the price goes from here. I suspect it will see $14.50 to $15 and that would be a good re-entry point for a long position...but I won't bank on the drop from here to there. For me, the CTP trader, I will wait for the next trend to emerge then position accordingly.

JD.