Study Guide for Come Into My Trading Room - Forex Factory

186 CASE STUDIES
Trade 6: Vimpel Communications VIP—Exit Answer
Chart A6-c
entry
long
A BC DE
VIP starts rising slowly, retreating to its EMA and giving traders a chance
to get long near value. It gathers steam and hits its upper channel line
in area A, where Force Index rises to a new multimonth high. That is a
sign of the great force of bulls, pointing to the likelihood of higher
prices ahead. That peak makes it very tempting to hold through whatever
decline may lay ahead. Still, there is no harm in selling and looking
to reposition long when the stock sinks back near value in the area
of its fast EMA.
In area B, VIP declines into “the sweet zone” between the two EMAs;
its daily ranges shrink, as lower prices do not attract traders’ attention.
Prices pop up in area C, then retreat without reaching the upper channel
line. The next rally, in area D, provides a superb selling opportunity.
Prices reach the upper channel line, an overvalued area. At the same
time, Force Index, which had been calling for higher and higher prices,
traces a bearish divergence C-D. It shows that bulls are running out of
steam, and the rally is close to its top.
Prices stab below the slow EMA and offer another buying opportunity
in area E before embarking on a new upleg of rally. One of the