Trading New 78 Day High on 12Bars RSI above 60 after 200EMA Breakout

Trading New 78 Day High

after 200EMA Breakout, 12 Bars Price above 200EMA and 12Bars RSI 14 above 60.

In the quest of finding that quick move as well as taking profit in a short span of time while banking on the momentum of a stock I was able to find another pattern that when observed carefully could potentially give you a handsome profit. 

This is a Test on August 31, 2020 of EVGN which showed as one of the New 78 Day High on Stockfetcher. Please refer to my stockfetcher script on New 78 Day High on my previous blog "New 78 Day High Offset"

Fig. 1 "EVGN Daily Chart"

This is the chart of EVGN when it made it's New 78 Day High. Try to observe the points that had been numbered according to the Analysis. Better still if you open the image in a separate window so you can follow through the Analysis well.

ANALYSIS:

1. Price B/O (Breakout) on 200EMA after 2 failed attempts on High Volume
   (see 1a and 1b failures).
2. Price Retested on 200EMA. 
   NOTE 1: The Retest have an RSI above 60 
   NOTE 2: Price retest is not even touching the 200EMA
3. 30EMA B/O or crossed above 200EMA
4. B/O failure at 1.50 on August 14, 2020 and
   successful B/O at 2.50 on August 25, 2020.  
   NOTE: RSI on both Failed B/O and Successful B/O were all above 60 
                This is a very bullish signal meaning that bullish momentum is really strong.
5. B/O at 2.00 where the candle had formed an inverted hammer candle.
   NOTE: Observe well that the RSI of this candle is even very strong at 82.88
                This simply means that the bulls are ready to take on beyond $2.00.
6. The Price had always been above 200EMA for 12 bars. Observe well the price action within this span of time. It is creating a Supernova. This means that the price can still surge higher but may have a very strong pullback after. 
   
   Since #2 to #5 our bullish candle move had gone 5 bars already, we are going to Peggy back on the momentum of the last 3 bars until the 8th bar. Most significant move follows a rhythm of 8 bars before creating a strong pullback. 
7. The RSI 14 of the price after the successful 200EMA B/O had been above 60 for 12 Bars. Observe well the RSI wave within this span of time. The wave is even climbing beyond RSI 80. This is highlighted with red rectangular box shaded with yellow.

TARGET CALCULATION

If I would go with my normal way of calculating the Target Price I will use my formula of calculating it. But since I am targeting of a 3 days trade only, I have to use a different approach. However, I will still lay down my formula calculation of the Target Price, so I will know the possible price it can go higher.

NORMAL Calculation of Target Price

TP = Target Price
PH = Previous High is at $1.50 when there was first attempt to breakout the 200EMA at #1a
VL = Volatility Low is at $0.75 the lowest low before the start of #1a breakout attempt.
BC = Breakout Close. This is BC2  at 1.66 after successful B/O at 1.50

TP = ((PH-VL)*3) + BC)
TP = ((1.5 - 0.75) * 3) + 1.50)
TP = 3.91 or $4.00

Based on our calculation, the stock can probably go up to $4.00. What we would like to see is make the most of the 3 days to follow after this New 78 Day High. The $4.00 can be good for a swing trade of another 12 to 15 bars.

Immediate Calculation of Target Price for the 3 bar trade.
Here we do not even have to calculate. 

1. What I normally do is make an arrow from the close of the Breakout candle that successfully broke the 200EMA(See Fig. 2). 
2. I stretch this arrow up to the High of the last candle on August 28, 2020. See H1 arrow with a height of 0.77.
3. I clone this arrow (See Fig.3).
4. then place the cloned arrow H2 on top of the H1 arrow (See Fig.3). 
5. So if the cloned arrow starts at the New High of 2.10 which is the high of H1 arrow, this will end up a high of $2.87 (2.10 + 0.77).
6. So your Target Price on the 3 bar trade will be $2.87 or $2.85 (See Fig.3).

 

Fig. 2 Creating the arrow from the close of the Breakout Candle at $1.33 

Fig. 3 Cloning the Arrow to use as H2 and get the Target Price

ENTRY

The New High had just broken the $2.00 Whole number resistance. Most of the time, after a price breaks out of this level, it will always retest what was broken before continuing higher. So if the price had gone to $2.10, chances are that the price would somehow retrace back to $2.00. With this in mind we will set our entry point at this whole number as our entry.

Entry = $2.00

TRADE CALCULATION:

MONEY = 2,000

SHARES = 1,000

BUY @ = 2.00

BUY AMOUNT = 2.00 * 1,000 = 2,000

TP = 2.85

TARGET AMOUNT = 1,000 * 2.85 = 2,850

PROFIT = 2,850 - 2,000 = 850.00

STOP LOSS = 1.85

LOSS AMOUNT = 1.85 * 1,000 =  1,850

TARGET LOSS = 2,000 - 1,850 = 150

With all the Analysis and Calculation we tried setting up the Trade using the Prediction and Measurement Tool of Tradingview and assume a trade based on our calculations. The following chart gives you the result. A target of $2.85 had been reached. A gain of  $0.85 from the entry of $2.00. A $850 profit in just 3 days of trade on 1,000 shares on an investment of $2,000. (See Fi. 4)

Fig. 4 Target Price of $2.85 had been reached