Yesterday I opened a small position on DAN. Unfortunately I didn’t find it in time to buy it when it gapped down to $9.80.
This morning I added to my position at $10.71, a breakout over yesterdays high. I wanted to show you the chart I’m looking at and explain what I’m looking for and how I trade this setup.
The miss in sales and earnings plus the new loan facility have driven DAN down to a buyable level. I would have preferred to buy in the low 9’s but you have to take what the market gives you.
The gap down that I missed was the buy signal. In the chart above the parallel lines are formed from the three touch points on the lower side of the down slope. The upper line was copied from the lower so I would have the degree of down slope on the upper line. A break of that is a valid breakout.
Conveniently DAN formed a Cup & Handle. I denoted the two lows with heavy yellow lines. The high of the cup was $10.70 and when that was breached so was the upper trend line.
An aggressive trader would buy at the gap down. A less aggressive trader would buy at the breakout. I buy at both and if your an aggressive trader so should you. The breakout is conformation that the price reversal is valid.