Saturday, May 10, 2008

Fairfax Financial Holdings Limited (NYSE:FFH)

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Ok, so even if you throw away the fact that I only discovered the ascending triangle pattern AFTER I had placed the trade, there's some other interesting things about that chart when I was looking at it at that time which made decide to buy it:

  • RSI(3) oversold
  • It was nearing the 270-ish area, which was a zone of previous support
  • It was nearing the 200d SMA, which was trending up, implying a longer-term uptrend.

So, I felt that there was a high probability of a reversal at hand based on the above three technical reasons. After I bought, I was discouraged to see it drop further below my entry point. But I was encouraged to see no follow through to the initial sell-off. That was key to my decision to hold on to the trade. It also helped to not micromanage my trade, nor monitor my trade every 3 seconds. As the trading session unfolded, it became more and more apparent to me that 276 was going to be the day's bottom. I held on, and flipped it the next day, +1R profit.

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