Palm provide one of the best case study for Ichimoku as a trend trading tool.
If you have gotten the stock back in end 2008 or early 2009, you will have ride it to the top at around $17 from somewhere between $3 or $6.
Here’s one for the bearish trade. Do note that it is used for trend trading.
1. If we have went long back in 2009, the best time to get out is around Oct 23 or Oct 26 when the Tenkan sen cuts the Kijun sen to give a bearish cross.
2. The price also went down very fast with the kumo providing very little support.
3. Palm stage a rebound and tried to break through the kumo from Jan 4 to Jan 19.
4. There is a weak bullish cross around Jan 8 at $10.98 and if you tried to do a bullish trade it will ride you to the top at around $13.56 before it turns.
5. The key point to note here is how it hit the kumo and reverse; a very strong signal that there is no catalyst to push it forward.
6. For trend traders, a bearish Tenkan sen – Kijun sen cross will have been seen on Jan 29. In this case, we can see how with a weak trend, the trade will not be profitable if you wait till the bearish cross is confirmed.
7. A better way is to start taking profit when it dip below the Tenkan sen on Jan 22. Assuming an entry price of $11.04 on Jan 8, and an exit price of 12.50 on Jan 22, the profit will be around $1.46 per share.
8. Noticed how the price never went above the Tenkan sen after that? In fact, assuming we enter a short trade when the bearish cross is seen on Jan 29 at around $10.98 till now, Feb 24, … the closing price is $8.40. That represents a profit of $2.58 per share.
Note (Reminder) :
– No long entry if price is not above Tenkan sen (for short term trades)
– No long term entry if there is no confirmation from Tenkan sen and Kijun sen (long term trend trading)