E*Trade (ETFC) - Get E*TRADE Financial Corporation Report stock continues to languish in a virtual penny-stock arena in terms of price. It results in huge volumes, but is there a trade in all that trading?
The weekly chart shows us a lot of failed swing points tests but most importantly, a large trading range that has spanned nine months now. The top of that range is a band that stretches from $1.85 to $1.97 while the bottom of the range approximates $1.18 to $1.28.
When wanting to trade a range, you have to first determine if it is broad enough to offer opportunity. In the case of ETFC, you can take a position with about a 20-cent risk then shoot for the other end of the range, which amounts to about 55 cents, so you are almost at 3:1. That's good enough.
The next question is do you trade just one side of the trade (long or short or both)? In the case of ETFC, both sides are probably about equally risky, so it doesn't really matter which one you trade, and thus, trade them both if you are trading it.
That's good because you can run one way, then flip it, and trade the other way keeping your capital working for you. You just have to have discipline on your entry and exits -- both on success or failure, lest you ruin the advantage you have with your trading plan.
On the monthly chart, if ETFC is ever to regain a semblance of its former self, it has to take out the two resistance lines shown on this chart and preferably do it with more than 3 billion shares on a monthly basis.
Unless it does that (and that seems quite unlikely any time soon), there is no reason to marry the position. Instead, just have fun with the range trade but be disciplined about your entry and exit points. Until next time, just keep trading the charts!
L.A. Little, author, professional trader and money manager, writes daily on
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His background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, L.A. espouses a simplistic technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and the qualification of trends, L.A. provides a breath of fresh air to an otherwise crowded room of derivative indicators with the emphasis on technical minutiae.