For trading on June 12, ACC was a classic case of low volatility.
Let us see how this trade worked.
The Newsletter / Market Watch for June 12 has a list of contraction signals. The relevant segment is reproduced below:
ACC emerges as a strong candidate for trading contraction signal setups on June 12. The stock satisfies three of the most important parameters for low volatility:
ID - Inside Day
NR4 - Narrowest Range in 4 days
NR7 - Narrowest Range in 7 days
Notice the mark of ‘X’ in the columns for ID, NR4 and NR7 for ACC.
The Daily chart for ACC suggests that ACC is in a consolidation / Trading Range.
The daily chart confirms that ACC may be heading for a breakout. This lends added weight to the contraction signal.
NewsLetter Trend:
Our Newsletter gives the trend for ACC as : Up Last: Tgt 180.
The notations mean:
ACC trend is UP. This may be the last leg of the up move. The target (Tgt) may be 180.
Since we see an upward bias in ACC we will only take the ‘Buy Above’ signal given in the contraction signals.
On June 12, 2002, we are ready for a trade in ACC if the setup works.
Trading Plan:
Buy ACC above 155.4. Place a protective stop below 153.1 (This is the sell below number) or below the low of June 12, 2002, whichever is lower. We will also take profits if we get a gain of at least 2.0 % in intraday moves.
Actual Trade:
On June 12, We see ACC open at 153.50 and move up and we are long at 155.50, 2 ticks (10 paisa) above the buy price. ACC makes a low of 152.45. This becomes our stop for the day. The low of 152.45 was actually just a flash and did not come in any intra day data feed. But, we will accept this as our protective stop for the day. Our profit target is 158.60. Soon enough, ACC reaches this target. We exit for a profit of Rs 3.10 per share in a trade that lasted about 2 hours.
Questions:
Q. What should we do if ACC does not hit our stop and does not hit our Profit target during the day? Should we carry forward the trade?
A. We should carry forward the trade only if ACC is closing the day above our entry price. If it is not doing so, it is best to exit at the close.
