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3 Drives to a Low -update on Apple and a new setup

CMC Markets

An uptrend is now underway on the 3 drives buy set up I posted for Apple on 24 March.

In that blog, I undertook to post thoughts on a possible profit objective if the trade got underway.

By coincidence, I noticed an example of the same set up developing today in the major Chinese oil and commodity carrier China Shipping Development..

Apple

The strategy outlined on the chart below involves

  • Entry on the first close above the high of the candle making the 3rd drive to a low
  • An initial stop loss just under that candle
  • An initial profit objective at the 50% retracement level for the last major swing down.
  • The potential to move the stop higher if the new uptrend continues
  • Potential to set a new profit objective depending on the structure of the new uptrend

Apple CFD - Daily. Source: CMC Tracker

China Shipping Development (1137 Hong Kong)

China Shipping Development CFD - Source: CMC Tracker

This is another example of the same setup as Apple. It involves:

  • A steep downtrend leading into the pattern
  • 3 drives to a low that you can put a trend line across
  • The trend line should be flatter than the downtrend leading into the pattern and no more than about 45 degrees
  • Ideally the pattern has Fibonacci symmetry but this is not essential in my experience
  • Often the 3rd drive will whipsaw below the trend line. This happened in both the Apple chart and with this chart. In both cases this 3rd drive found a Fibonacci cluster level

Using the same approach as for Apple, entry could be on the first close above the high of yesterday's candle. If price falls away before then and breaks yesterday's low, there is no set up.


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