Scanning the charts this evening, I came across what appears to be a textbook short setup in Terra Industries (TRA). They are an agricultural chemicals company which has been a bullish industry for much of this year, but in this particular stock, after advancing strong in July and August, went completely parabolical, in an unsustainable fashion. Today’s sell-off in the market created an ideal short setup in TRA that I will put out for subscribers tomorrow morning (which will include the entry, stop-loss, and target prices).
At the peak of the rally, TRA created a harami cross pattern, which is a strong bullish advance, followed by a doji candle, which the real-body of the candle is contained within in the previous day’s bullish candle. The best way to remember this is that it looks like a pregant woman. A long bullish candle, whose next day action forms a bump representing the “baby”.
Also worth noting is the bearish divergence in the MACD where it failed to make a new high (instead it made a higher-low) when the stock price itself did so.
All-in-all, TRA represents what I believe an excellent trade with a solid risk-to-reward ratio.
Here’s the TRA Chart…