Understanding A Great Trade Setup: Dupont
When finding a great swing trade, one must look at multiple factors. I hope to reveal my mindset fully, helping the average investor understand how I reached my decision to short Dupont (NYSE:DD). I believe a short on this stock an extremely high success rate, bordering on 90% over the next month. The downside target is $64.75, then $59.95.
1. The chart is extended. In the last month DD has jumped over 10% and currency is trading at highs not seen since the year 2000.
2. There is a key gap fill in this range from 2000 that the stock has currently filled.
3. Connect the recent highs from May 31st, 2013. They connect perfectly and everytime the stock has touched this level, it has pulled back.
4. There is a time count on the daily chart extending into the doji forming today. This should be a short term pivot top.
5. The stock has extended itself to the max move above the 200 moving average. Note how throughout history, the stock has never been much more extended from its 200 moving average prior to pulling back.
These reasons create a very solid base for a short trade on Dupont (DD). The downside should begin shortly and last at least a month or two.