Anatomy Of A Trading Setup

Immunomedics (IMMU) is a stock I’ve been covering in the Lund Loop Newsletter for a little over a year now, ever since a subscriber alerted me to it when it was in the single-digits.

let’s hear it for the power community. Woot!

Since June, it’s played out the familiar pattern of a stock in the midst of a trend change.

  • Double bottom

  • Break of a long down trendline

  • A retest of that trendline

  • Recapturing the four major moving averages

  • Stair stepping higher price action

This is important context indicating that the downtrend has been broken and the stock is in the beginnings of a new uptrend.

Over the last six months, IMMU is up almost 100% from its June low but has pulled back some in the past two weeks.

What I want to focus on here is Monday’s price action, which provided a great opportunity for a quick day trade or a new entry for a swing trade.

In the first hour, IMMU took a big hit, losing over 10%. The volume was decent, but nothing out of the ordinary – and there was no news coinciding with the drop.

If I had to make guess, I’d say some fund had to get out of their IMMU position fast - why we’ll never know - and just dumped it.

But the important part, as always, are the technicals.

By the end of the day, the stock closed down just over 1%, meaning it retraced almost 90% of the intraday low. In addition, it closed back above a support level and stayed above the 50-day moving average.

This shows strong demand for the stock.

In addition, the reversal provided a clear setup and a crystal-clear stop loss point.

The aggressive trader could have bought at the close Monday, assuming that the strength in the stock would carry over to Tuesday – which it did.

The day trader and the swing trader could have bought on Tuesday when price broke above Monday’s high. The former could have closed out at the end of the day for a 3%+ gain while the latter would have held.

In all three of these scenarios, the stop would be below the recent support level.

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