I got stopped out of CAT this morning, and that's great. Why? Because I made a nice fat profit on it in just a few weeks, but I don't have to worry about blowing up that profit when the bear tumble resumes (if it hasn't already). Let's take a look at the chart:
There are a few elements to look at here:
- The double-bottom you see highlighted with the rounded red rectangle was my signal to get in, particularly since the second bottom wasn't quite as low as the first. This makes for a nice clean entry with a very obvious stop price.
- The gap higher, which wasn't filled, was also an encouraging sign for this long position. I have shown this with yellow highlighting.
- As the arrow points out, I keep my longs (in this market) on a very short leash. I am very intolerant of any softness in my longs (OK, knock it off in the back row….…), so the stop was set at the low on the bar to which the arrow is pointing. That was violated today, so voom, like a rat out of an aqueduct.
That's it.
