In this column, let's circle back to
At the time, we liked what we saw and expected it to work its way higher to test the $25 area which it has subsequently done. Now we will see if after a pullback the retest of the long-term downtrend line is breakable. If so, then $28 to $30 will become the target.
The monthly chart above shows resistance as well as the steady uptrend channel that XLNX continues to trade in.
Note that on the long-term time frame, prices could retrace to $20 to $22 and be a great buy, not a sell. You have to accept that level of drawdown if you want to trade this on a longer-term basis.
Now let's pull the chart into the intermediate term.
This reveals two demarcated support zones. The first is around $22.50 to $23, while the second is in the $21 range. Note that the second is the strongest and that there is a good chance we will see the first zone tested rather soon.
Both of these areas are buyable if your outlook is right and if you prefer or at least don't mind buying into falling prices. Falling prices, or retraces as I like to call them, are opportunities as long as the stock is acting correctly in terms of its trend and if volume acts properly as price retreats into the support zones. So far, XLNX is acting just fine.
To emphasize that thought a bit more, here's the short-term time frame.
Here you can see the high volume bars that currently are being tested.
From a trading perspective, one could wait to see price come into the $23 area on this time frame to start some purchases. I prefer to nibble at all the support zones on the multiple time frames (short and intermediate term) with the idea of using the long and intermediate-term time frames to determine my stop loss orders in case I'm wrong. In the case of XLNX, there are three possible areas where purchases can be made. In such a case, I tend to buy 25% of my desired position at the first one, 35% at the second, and finally 55% at the last with the stop beneath them all.
If I'm most fortunate, all three entries will execute and prices will swing higher immediately afterwards. But that usually doesn't happen as you might expect. Many times you'll only get the first order executed. That's fine though, because in that case you just have to wait and look to do the same setup again at some later point when prices are even higher.
If the stock is good, it will continue to work higher as long as the general market allows it and as long as the stock remains in a bullish uptrend. Note that scaling in allows you to get in earlier. But given the weighting of the various entry points, your overall cost basis is better once you fully scale in thus making your stop out point less painful if wrong.
XLNX continues to look good. If you didn't get in back in November when we first examined it, here's a second opportunity.
So until next time, 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.