Back on May 3, I wrote about how I keep my trading process as simple as possible.
For example, I don’t clutter my charts with a ton of indicator studies and trend lines. This keeps my price charts highly legible and easy to understand.
One look at a chart is all you should need to be able to identify the main trend and some key price levels the market is likely to test.
Simple price charts also allow you to change gears quickly from reading the market to trading the market.
On May 3, we looked at a price chart of Expeditors International of Washington (EXPD) as a case study.
Here’s a version of the chart that I shared back then.
This chart clearly shows how the trend in EXPD was down from May to September of 2022.
A series of pivot points moving in one direction is a great way to identify a trend. We can see how from May to September the pivot points were all moving lower together.
But in November 2022, EXPD broke the series of lower highs and lower lows. This was the first sign that EXPD’s trend was about to change.
It was this break in the structure of EXPD that put me on alert to look for bullish trade setups.
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That’s why back on May 3 I wrote, “The actual trigger for me to get into a trade could be a bull flag, a falling wedge, a moving-average crossover, or any other number of setups.”
As it happens, EXPD ended up tracing out a bull flag over the month of May 2023. A bull flag is when price action trades neatly within a descending parallel channel after a strong move up. Once prices break out of the channel, the flag is complete.
You can see this bull flag in action on a four-hour chart of EXPD below:
As you can see, EXPD traded within the boundary lines of the blue flag (blue lines) between May 5 and May 31 before breaking out on June 6.
This is a great example of a powerful trend continuation setup. After breaking out of its bull flag, EXPD rallied over 4% in just 10 days.
We now have a fresh higher high in the stock. If EXPD establishes a new higher low, then there will likely be another opportunity to trade the stock to the upside.
On the other hand, if EXPD breaks down and the uptrend gives way, then there may be opportunities to play the stock on the short side instead.
Either way, it’s important to keep an eye on the stock’s price action, particularly on what new pivot points will be established.
Happy trading,
Imre Gams
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Is there a trend you’re currently watching on a particular stock?
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