Saturday, October 28, 2006

Hammer Entry

A powerful entry point is after the "hammer" formation in either white (green) or red. The hammer is formed when the price declines and then comes back up - this leaves a longish tail and a flat top. Some people don't like to use the red hammer for the entry but I do. Here are three examples from Friday October 27th.

Note that the entry point is always higher than the hammer. I use that as a confirmation point and set my buy stop a couple of cents higher the the top of the hammer. It probably isn't necessary but I like the comfort of the confirmation and am willing to give up a couple of cents for it. If I set a stop it would be at the bottom of the hammer body or 10 cents whichever is greater.

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