Study Guide for Come Into My Trading Room - Forex Factory

168 CASE STUDIES
Trade 2: Sun Microsystems SUNW—Entry Answer
Sold Down to Rock Bottom
Chart A2-a
This is another “fallen angel”—a high flier blown out of the sky by the
bear market in high-tech stocks. Many poor souls were desperate enough
to buy SUNW at 65, but few buyers came when SUNW hit its 7.50 low.
The average height of a bar reflects the level of trading activity. The bars
were much taller above 60 than below 10, reflecting greater public
interest in this stock near the top than near the bottom.
At the right edge of the weekly chart, MACD-Histogram has completed
a bullish divergence A by ticking up from a much more shallow
bottom in 2001 than it reached in 2000, even though prices are much
lower. Moreover, there is a rarely seen bullish divergence B of MACDlines
between the April and September bottoms. In area C, prices are
undervalued, below the EMA, and the latest bar of MACD-Histogram,
while pointing down, is shorter than the previous bar. This uptick completes
a bullish divergence, telling us to look for an entry into a long
trade on the daily charts.
The daily chart shows a bullish divergence A between Force Index
and price, reflecting the weakness of bears during the late September
A
B
C