Friday, September 18, 2009

On 9/10/09, the airline index XAL was making eight month highs, boosted by an upgrade of United’s parent, UAL Corp (UAUA). UAUA gapped up from the previous day’s close of $6.45 to open at $7.14, and was ready to soar higher. Traders at Trading RM saw United’s sector leadership and took advantage of its strength.

The market gapped up around 5 handles and immediately began filling the gap. Conversely, UAUA saw aggressive buying on solid volume. As seen in the 3-minute chart below (middle right-click image to enlarge), UAUA was trending upward and became relatively stronger than the market. The 1-minute chart shows 4 green bars within the first 5 minutes, all closing on their highs. The upgrade, divergence from the market’s gap fill, bullish 1-minute bars, and strong volume were all great signs to get long.

As seen in the Trading RM Real-Time chat window at left below, our traders were buying UAUA at 8:36 CST. UAUA rested for a few minutes on lighter volume and then the buying came back in. Supported by the market’s turn upward, UAUA kept pressing up. Seeing that United was trending on good volume, still outperforming the market, and relatively broad 1-minute bars closing on highs, more traders got long at 8:42 and 8:49. At 8:52, traders that were early to the move were hitting profits targets and others locking in profits. As volume slightly tapered and the candles became less bullish, our traders sold into the move with exits at 9:03 and 9:06. Taking a solid winner in UAUA was a great way to start the day.

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