Trade Ahead of the Crowd

Let's look at three current charts that show anticipatory trade setups.

Minefinders (MFN) -- Daily eSignal

Minefinders (MFN Quote) has been moving higher in a steady uptrend since bottoming out in December at $2.58. It stalled at resistance near $9.40 nearly two weeks ago and has been moving sideways in a tight pattern since then. An early position taken within this congestion, with a stop loss around $8.60, might enjoy the fruits of the next breakout.

These narrow range patterns offer a perfect fit with anticipatory strategies. These include triangles and other scenarios in which an active trend goes dead while it shakes out profit-takers and moves into position for the next rally or selloff wave. An early entry signal triggers when the instrument prints a NR7 bar, which represents the narrowest range price bar of the last seven bars.

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International Game Technology (IGT) -- Daily eSignal

International Game Technology (IGT Quote) bottomed out at $6.81 in March after a long downtrend. It rallied above the 200-day moving average in May and dropped into a broad sideways pattern. The stock rallied above pattern resistance at $16 this week and hit $18.15 before starting to pull back. A decline to new support should offer a great trade entry.

Market dynamics work against reactionary traders because by the time they're willing to act, smarter folks who took early positions are booking profits and heading back to the sidelines. This natural conflict sets up ideal conditions for a buyable reversal into the price level that attracted their attention in the first place.