My trading plan<\/a> has only four simple steps, and I apply them to every single trade I take. This has led to consistent trading results.<\/p>\n And right now, I’ve spotted an opportunity in the market that meets the criteria found in my plan.<\/p>\n So, let’s walk through it using my four steps to success…<\/p>\n There’s a trade setting up in DICK’S Sporting Goods (DKS).<\/p>\n And my analysis tells me to prepare for what could be a dramatic sell-off. So, it seems like a prime opportunity to short DKS.<\/p>\n Let’s check out a price chart of DKS so I can show you what I mean…<\/p>\n Here’s how I’ve filtered my analysis through my trading plan…<\/p>\n Step 1: Trend Analysis<\/strong><\/p>\n DKS has been in an uptrend since November 17, but now it looks primed for a sharp move lower.<\/p>\n Although DKS has rallied over 40% since its November 17 low at $98.92, there are signs that the move higher is getting weaker.<\/p>\n Therefore, this trade plan is targeting a reversal setup in DKS.<\/p>\n Step 2: Chart Pattern<\/strong><\/p>\n The rising wedge pattern (blue lines) is a clear sign of the weakening trend.<\/p>\n Rising wedges are reversal patterns. The overlapping nature of the price action contained between the lines hints at underlying bearish strength building up.<\/p>\n Step 3: Momentum Analysis<\/strong><\/p>\n The momentum signature of the Moving Average Convergence Divergence (MACD) indicator (in the bottom half of the chart) is further proof of underlying bearish strength.<\/p>\n Take another look…<\/p>\n Notice how the MACD peaked on January 10 and has been steadily trending lower ever since. Price action, however, continued to make new highs.<\/p>\n This is known as bearish divergence<\/em>. It’s called divergence because the MACD is trending lower while the stock’s price continued to trend higher.<\/p>\n Eventually, price action should follow the MACD.<\/p>\n Step 4: T.E.S.T.<\/strong><\/p>\n Timeframe: <\/strong>DKS rallied from its November 17 low of $98.92 to a high of $136.85 on February 6. Therefore, we can reasonably expect a decline of similar force to take up to three months.<\/p>\n Entry:<\/strong> I like to trade the rising wedge by entering the market on a break of the pattern’s most recent low. In the case of DKS, that means a price of $119.50.<\/p>\n Stop Loss:<\/strong> A very reasonable stop loss would be a price of $138, just slightly above the February 6 high. (Remember, we’re going short DKS. So if it starts trading higher, our losses would increase.)<\/p>\n If the market were to trade back above this level after breaking below $119.50, then the trade idea is simply wrong.<\/p>\n In such an instance, it makes sense to exit the trade for a controlled and minor loss and wait for the next opportunity.<\/p>\n Target:<\/strong> A great minimum target when trading a rising wedge is the origin of the chart pattern. In the case of DKS, the wedge pattern originated from a price of $98.92.<\/p>\nCareful Planning for a Real-Time Opportunity<\/h2>\n
![\"Chart\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202302\/20230227-jmu-01_vfg568.png\")
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