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Here’s the exact report from January 7th, 2001 that we posted. Spelled out is the instructions for Redback Networks, RBAK, that we then successfully traded for a big percentage profits in a very short amount of time on half the trade. More importantly is the logic behind the trade and the plan in place to protect against a big loss.

Check the results for yourself . click HERE (opens a new window).

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Updated: Sunday, 7PM, Mountain time January 7th, 2001

The Wooding Report

Each week’s report focuses on providing you with real time stock market education to profit from.

The Wooding Company’s weekly report contains commentary on current stock market conditions as measured by the Standard & Poor’s 500 index. Technical analysis is used to determine market direction, support and resistance areas, momentum, turning points, continuation signals, divergences, and price and time targets. Other indices, such as the 30 year Treasury yield, semiconductor index and the Nasdaq Composite are also analyzed.

Trading tutorials educate you on the technical tools available for profitable trading results. Each tutorial explains a concept; such as moving averages, candlesticks, or stochastics and shows both historical and current examples. In addition, insights into when and when not to use the technical tools are provided.

Stock Rocket System for buying stocks poised to make big moves . see all the details at https://www.woodingtrading.com/stockrocket. html

Trading Pattern for buying and selling stocks making “fast and furious” reversals . at https://www.woodingtrading.com/tradingpattern. html

This week’s report includes:

Trade setup for:
&nbsp Redback Networks (RBAK)

This week’s report differs from our normal weekly reports. You’ll see all the reasons for Monday’s trade setup for Redback Networks. Included are assumptions we are making, as many possible scenarios as we envision, and what we will do if certain actions occur.

If you find this information valuable, pass this along to someone who might also benefit or refer them to https://www.woodingtrading.com/07jan01.html.

Trade setup for – Redback Networks page 2 of 9 for the week of January 7, 2001

For Monday, January 8, 2001:

(1) If Redback Networks, RBAK, opens less than or equal to $38.500, then we are placing an order to buy (0.5) units on a stop at $38.625 with a limit of $38.875 (buy stop limit, stop = $38.625, limit = $38.875).

(2) If RBAK opens great than $38.500, we will either wait until an obvious intraday high occurs, then we will place a stop limit order just above the high OR not place a trade.

(3) If filled, we are placing a sell stop order, Good-Till-Cancel, no limit at $33.125 (sell stop, stop = $33.125).

(4) If filled and RBAK closes less than the open, we will CONSIDER exiting the position on the close for a small loss.

Trade setup for – Redback Networks page 3 of 9 for the week of January 7, 2001

Bullish conditions (daily):

(1) Wednesday’s price bar was a reversal bar to the upside: new low, close greater than the open, close greater than the previous close. In candlestick terms, Wednesday was a “bullish engulfment”: the previous day’s close was less than it’s open and Wednesday’s close was greater than it’s open. Also, Wednesday’s open-to-close range surrounded, or “engulfed” Tuesday’s open-to-close range.

(2) Volume has been declining as price has been declining (see the blue trendlines drawn above the volume).

Trade setup for – Redback Networks page 4 of 9 for the week of January 7, 2001

Bullish conditions (daily):

(3) On the daily line chart, the January 2nd close (2) below the previous closing low (1) is typically a trend continuation signal. In this case though, RBAK reversed the next day (see previous chart) and closed significantly higher. A one day trend continuation that quickly reverses often marks a significant top or bottom.

Trade setup for – Redback Networks page 5 of 9 for the week of January 7, 2001

Bullish conditions (daily):

(4) The recent decline from mid December (3) to early January (4) matches the decline from late September (1) to mid October (2).

Trade setup for – Redback Networks page 6 of 9 for the week of January 7, 2001

Bullish conditions (daily):

(5) The recent decline took 15 days. The most recent previous decline (from 5 to 6) lasted 30 days. The recent decline took approximately 50% in time relative to the previous decline.

(6) The recent decline took

162% of the time that the decline from late September (1) to mid October (2) (15 days versus 9 days).

The 50% and 162% (and others not mentioned) time ratios often measure current moves versus previous moves.

Trade setup for – Redback Networks page 7 of 9 for the week of January 7, 2001

Bullish conditions (weekly):

(7) From the initial public offering (1) to the all time high (2) took 43 weeks , from the all time high (2) to the recent low (5) took 42 weeks . Approximately 100% time match.

(8) The decline from the all time high (2) to the April 2000 low (3) was $148 . The decline from the June 2000 high (4) to the recent low (5) was $153 . Approximately 100% price match.

Trade setup for – Redback Networks page 8 of 9 for the week of January 7, 2001

If price rallies from these levels, the expectation is price will rally at least to Thursday’s high (3) of $47.500.

If price rallies above Thursday’s high (3), then the next target is the December 27th high (5) of $52.500 This price level also corresponds with the price move from Wednesday’s low (2) to Thursday’s high (3) added to Friday’s low. Wednesday’s low = $28.000, Thursday’s high = $47.500, Friday’s low = $33.375. $33.375 + ($47.500 – $28.00) = $52.625 .

Beyond these levels, there is a gap to fill (6) which corresponds with the 38% retracement level of the decline from the mid December high (1) to the recent low (2). This price is near $55.

Keep in mind that moving averages often act as resistance in a downtrend. The 20 day moving average is currently near the $60 level and dropping.

Trade setup for – Redback Networks page 9 of 9 for the week of January 7, 2001

If RBAK does not trade above Friday’s high, we will place an order on Tuesday to buy on a stop with a limit just above Monday’s high assuming Tuesday’s open is less than or equal to Monday’s high. We will continue with this scenario until filled or RBAK trades below $28.000.

If we are filled on our order and subsequently stopped out, then we will reenter using the same type of buy stop limit order as long as RBAK has not traded below the recent low of $28.000.

If RBAK is forming a significant bottom at these levels, there will be ample opportunities to add to a long position. Testing the waters with a small position at this time is a prudent way to guarantee we have enough capital to add to a favorable position.

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