Two Trade Setups: One Long, One Short

Here’s an article that I wrote for the Slope of Hope today as a guest blogger. Great website if you haven’t yet checked it out!

Today I want to provide y’all with a couple of trade setups that I thought depending on your trading strategy and market bias, could fit nicely into your portfolio. The first is a short setup in Goldman Sachs (GS). For many of us, the opportunity to short GS goes well beyond a normal trade – there a sense of satisfaction seeing such a corrupt company depreciate in price, no doubt.

I believe the trade setup is solid, and provides an excellent Risk-Reward scenario. Here you have a typical Head & Shoulders pattern, which is a total divergence from what we have seen from this market of late, with consecutive new highs taken place on a regular basis. You could argue that the right shoulder being higher than the left shoulder is a red-flag and I would agree to a certain point, but the fact that this is occurring while the market (i.e.the S&P) as we speak is attempting to make a new high once again, and that the financial industry as a whole is showing similar weakness, provides the trader an solid ‘edge’ in terms of trading.

The next setup I wanted to show you comes from another high-priced stock – Blackrock (BLK).Unlike Goldman Craps, BLK has managed to put in a new high of late (just barely though) and it is right now pulling back in a nice and orderly fashion, holding the 50-day moving average as a key support level in the process. If you are to go long in this stock, a break below the fifty is a clear ‘cut-and-run’ signal in my opinion, but for those of you who want to give this setup a little more breathing room, I would place a stop below the previous “higher-low” that was established.