ARANK (7214) - Bullish

Pattern - Uptrend Channel

As shown in the weekly chart below, there is a beautiful cup and handle with an uptrend channel.

Now, let's get more detail from the daily chart below as our trading time frame is daily.

ARANK has been trending up nicely within the uptrend channel and it broke out of the upper band today.

How To Trade Safely?

There are a few ways you can trade and there is no right and wrong because essentially it boils down to your risk management and tolerance.

No matter where you enter, the most important thing is where you will put your stop loss. I did emphasize that stop loss should be set at a point where it violates the bullish structure.  Check out http://klse.i3investor.com/blogs/candlestick/113061.jsp and have a good read if you haven't.

So do not simply put a stop loss too close to your entry just for the sake to buy more lots. Rather we should set a tactful location for our stop then to adjust the lot size to control our risk that we are willing to take for that specific trade. 

Always ask yourself what's your plan if you are wrong about a trade. When you have a trading plan and execute accordingly, you will sleep well.

Ideally, a low-risk entry will be at the lower band of the channel, followed by trading the breakout or retest of the rounding bottom as illustrated in green within the channel, then a breakout/retest of the previous swing high. Some good entries are circled in blue.

Depending on your risk tolerance, the stop loss could be set below the lower band of the channel, below the previous swing low, or below the neckline as highlighted in green or below the resistance-turned-support line as highlighted in blue horizontal line.

Now, let's think about the position on of the stop loss above. Since the price has been moving within the channel, will you be surprised if it comes back down to test the lower band before it heading up North? It will be a deep pullback but it does not violate the uptrend.

So, placing a stop below the lower band of the channel will not be easy to get stopped out. If you enter at the lower band of the channel and place your stop below the channel, you stop will be tight and legitimate so you will be able to buy more lot size.

If you enter at the breakout/retest of the green rounding bottom (i.e. first blue circle region), a conservative stop loss will be below the swing low of the rounding bottom. Or you can place the stop below the candle that broke out the neckline of the rounding bottom. Both stops are valid but the lot size you can purchase will be different based on the same risk.

Of course, we have all seen bullish stocks that do not have a deep pull back. In fact, some just consolidate without any pull back.

In short, if you chase high and buy at a high price and place your stop widely, your lot size will be smaller; If you place your stop too tightly in order to have a bigger lot size, you will risk hitting the stop during a pull back.

If you wait for a low-risk entry (i.e. trade on retracement), you will be able to have a bigger lot size but the downside is the price might not come down to your preferred entry.

These will be the different cases you will need to think through before you enter a trade. Always think about the risk first before the reward. When you take good care of the risk, the reward will take care itself, which I will elaborate more in my future post about trailing stop and riding a trend.

Topics That You Do Not Want To Miss

How to determine the "bullishness" of the patterns- https://www.facebook.com/BursaSGXcandlestick/videos/378260995905662/

Best Way To Learn To Trade Without A Mentor - http://klse.i3investor.com/blogs/candlestick/113821.jsp

Entry Illustration - http://klse.i3investor.com/blogs/candlestick/113605.jsp

Come Up With Trading Ideas & Turn Them Into Investing Ideas - http://klse.i3investor.com/blogs/candlestick/114110.jsp

Cheers,

Ming Jong

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