Using charts for stocks $GWH and $NRXP on October 12, 2021, Turbo Trading's Head Trader Robert Knight gives a detailed analysis of trading channels and how to know when to buy and sell. A transcript is below the video.
This is a short video on trading the trends. This is one of the strongest patterns that we like to follow. And this is $GWH, which was a new issue. Had a huge move today, which we managed to capture from around $15.50, up to close to $30. New issue yesterday, follow-through today, big move.
If we look at it, it did have quite a bit of action in the pre-market and then came off, before the opening. But at the opening, it does spike up. Now we didn't trade this because we want to wait and see where the market's going to go. It did halt, traded a bit, and then pulled back.
And what we're watching for in here was the first pullback entry up, which was right in here at the $17.50 area. Over here where it double bottomed around $16. But with that entry, we were able to draw a trend line.
It looked like this. As the day went on, we were able to extend it out and this trendline, and you can see if you catch it, they're traded up to the top. You know, maybe this would have been for trading at day trading. It would have been a little tighter in here like this. But what we see is a big strong channel that this thing gets into, and this is, in a sense, a low risk, low-stress kind of trade.
Because as long as it stays in this channel, you can stay in the trade. And so every time it touches the bottom here, you can buy the stock. And every time it touches the top of the channel, this was the channel like that to start with, in here, sell some there, sell some there, and then it accelerated through it.
So you need to move your channel lines out to there, pulled back, still continue to hold support, and away it went. So the key point is as long as it stays in this channel and you can stay in the trade now and you can see, that it held the 15-period moving average quite well. And it came down and it never really did touch the 50.
It did trade sort of between the 34 and the 50. A few times, but really it was this trend line that was of most interest to us and it held it all the way up. So you get into these trades, as long as it stays above this channel line in here, you can stay in the trade. And when it gets to the top of the channel, you scale a little bit out.
If you want, you can buy it on the dips and sell it on the rips, buy it on the dip, sell it on the rip. And then, you know, the point where you're looking to sell it. And when you get a pattern like this double top, you want to let some go here, it broke the channel. So, and then pop back up failed.
There was your exit signal right there, where it came down through the channel, popped back up through it, and then failed and then start to back off. And so from that level, $27, let's call it, it traded back down to $22. It was a $5 move to the downside when it broke out of that channel, but it was, from $17.50 to $29. So a $12 move, $11.50 dollar move. If you had to take this trade on the first pullback entry off and then just stayed in the channel and stayed with it.
Another really good example of that was this $NRXP. This was the same thing. This was in a different channel to start with this morning. It wasn't much volume and then started to go and surged really the opportunity to buy this stock because this was low volume and didn't really get a chance to . . it started late, didn't really do much . . . inched its way higher.
But when it broke out of this wedge pattern here, this was your entry up here. Right around $8.60. This is an entry up down here for sure, this first pullback, but you know, that would have been tough to follow tough, to see $7.35 to $9.
If you look at this wedge pattern here, because this is a more defined, rising channel. Popped out there was your entry and it forwarded you this rising channel line here. You can see again, this is just a great channel trade all the way up. Just as long as it held the channel, you could stay in the trade when it gets to the top of the channel you let a little bit out.
Pulls back you could have added something in there and then accelerated up through the channel. Now it gives you what they call the Jacobs Pitchfork. That's your new support line was resistance now support and there's, you know, chat line above it.
So again, here's your breakout of this wedge pattern pops. You could have taken it there, stayed in the channel that you can stay in the trade all the way up. So from, you know, $8.50 to the close, just over $11, close to a $3 move. 30% on your money, more than 30% on your money.
This is a very important pattern to recognize and draw the lines properly to stay in these channels because once they get running and they stay in those channels, you can make a lot of money. By not selling too early. So one of the problems with new traders or traders that haven't had a big win for a while, soon as it gets a little bit green, they sell and think, you know, think they did well by selling, you know, buying it at $8 and selling it at $8.50 or something like that when they could have easily stayed in the trade by staying in the channel and maximizing, a $3 move instead of a 50 cent move.