Fly United to Gartleyville - Exit

Technically, since we closed above the 8ema and the 3ema, and Stochastics are not overbought, we should remain in this trade. 

However, I looked back at previous gaps (see the yellow arrows on the Daily chart above) and every one was filled in. Given that, and we have a big gap right below us 2 days ago, plus a red body today, caught between the trend lines, headline risk tomorrow from the Federal Reserve Chairman speaking at Jackson Hole, bad things happening in Afghanistan, and tomorrow being a Friday, this is beginning to smell like a high risk trade at the moment.

It seems best to let things settle a bit, or react strongly, until early next week. So, sold the UAL Sep 50 Call for $0.80. Sent a Tweet out at 15:49 ET announcing our exit.

We'll keep an eye on UAL and get back in on the Gartley when the timing is better.

Summary:

Enter $101

Exit $80

Loss $21

Fly United to Gartleyville - Update 14

We closed above one of the 2 Trend Lines but not the other. We made a higher high and a higher low. Stochastics are still mid-range. Looks like we might be forming a Double Bottom. All in all, you have to say we're on a Bullish track. 

The next hurdle is closing above the other Trend Line, then above the 50sma, and the final obvious possible source of resistance is the 200sma. Between the 50sma and 200sma, there's a previous swing high at 49.60. That's another possible source of resistance.

It looks like it might be very difficult to get to any of the Gartley pattern targets, but this pattern has a high success rate. So, we're in the fight and we'll keep holding until there's a good reason to exit.

Fly United to Gartleyville - Update 13

Well, we're back in UAL to the long side. Today we gapped up at the open and didn't even try to fill it. The candlestick pattern is a "Doji Gap Up", which is very Bullish. We just continued higher and closed above the 8ema, and above the 20sma. We also had an ADX bullish cross.

Unfortunately, we're up against two different Trend Lines. This could provide some resistance, and could actually drive us back down to fill the gap.

We're still in the Gartley pattern on the Daily chart, and the D point has not been violated. This trade is still valid. So, got a UAL Sep 50 Call for $1.01. Same strike price as last time.

If we clear the current resistance, then we have to deal with the 200sma and 50sma at about 49.50.

The Target is still .618AD (the 61.8% Fibonacci retracement of the range between A=63.70 and D=42.56) at 55.62.

Fly United to Gartleyville - Update 12

Well, our UAL Aug 50 Call expired today. We bought it for $1.97 on 7/26/21. The chart looks weak, with a break below the triangle and a BB/KC breakout to the downside.

However, the Gartley pattern X point hasn't been violated, so its still a valid pattern. In fact, we haven't even violated the D point. So, I might trade this again to the long side, if we get a reversal.

On 7/26/21 this looked like a very Bullish chart. I don't regret going long. You have to accept not all trades will work. Again, this trade hasn't actually failed yet. It's just taking longer to reach a conclusion than I expected.

Bottom line, the loss is $197.

Fly United to Gartleyville - Update 11

By the close today we were below the 8ema and back inside the triangle consolidation. This could be considered a failure of the breakout or just a deeper check back before continuing higher.

If there was more value in our position I would have closed it out and watched for a possible reversal. But, unfortunately, we only have $0.12 of value left in the option. That being the case, I think the better decision is to hold the position and see if we get a bounce back up next week.

I think we're fully baked on this trade, but it doesn't make sense to sell now, with so little value, and it expires next Friday on the 20th. We'll have to ride it out.

If it keeps going against us, I may not post anymore updates until expiration.

Fly United to Gartleyville - Update 10

We're at a very, very important point in this price action. It's very common for a break out to go back and retest the break out level. That's what we did today on the Daily chart. 

We closed right on the trend line as well as the 8ema and 20sma. Now its all about where we go from here. If we close substantially lower, like under the lower trend line for example, then its more likely we'll continue down, in my opinion. If we close above today's high then its more likely we'll continue the current upward trend. Of course, its quite possible we'll have a quiet Friday and close near today's close, in which case we'll have to wait until next week to see where we're going. 

There's only one economic report due out tomorrow that might move the market, but its not a big one. Its the University of Michigan Preliminary Consumer Sentiment at 10:00am ET.

If we close above yesterday's high, which is the high of this uptrend so far, that would be a very bullish indication. We're still coming out of Gartley D point, which helps with the odds to the upside, but we have bearish factors too:

• The D point is below the 78.6% Fibonacci retracement.
• We formed a Bearish Harami candlestick pattern today.
• We're below the 50sma.
• We're below the 200sma.
• We're in a larger down trend.
• We're in the 3 worst performing months of the year for equities (Aug - Oct).

The good news is our risk is limited to cost of the options. Cold comfort, but it'll be greatly appreciated if UAL takes a nosedive overnight or over the upcoming weekend.

Fly United to Gartleyville - Update 9

Not much to say here. We breached the upper trend line and closed above it. Also closed above the 8ema. Stochastics are still mid-range, so we have plenty of runway.

Today was very constructive to our bullish position, but we still have to get through the 200sma and 50sma to reach our target.

We're looking good but our $50 Call expires 8/20/21. So, I added an order to sell the position when we reach break even at $2.00 for the option.

Fly United to Gartleyville - Update 8

Interesting candle today. We're still within the triangle consolidation on the Daily chart. However, we did poke our head out above the upper trend line, but we closed right on the trend line rather than above it. We did close above the 8ema though. Notice today's candle formed a Bullish Engulfing candlestick pattern when combined with yesterday's candle.

Importantly, we are right at the point in triangle (about 80% to the apex) where you can expect a break out. We could certainly bounce off the upper trend line and start heading downward, and thereby continue the bearish price action that led into the triangle. But, since we're in a Gartley pattern, there's a very good chance we'll break to the upside. And this is my expectation sometime this week.

Fly United to Gartleyville - Update 7

Zoomed in Daily chart above. We're in a triangle consolidation with mid-range Stochastics. Candlestick patterns in this environment aren't very helpful. What is helpful is that today's candle closed about 75% above today's low.  But, we have 4 small body candles in the last 5 trading days. Looks like a lot of indecision right here. We're below all the moving averages. Chart looks pretty weak.

We did close below the 8ema but it would be more reasonable to wait and see how we break out of this triangle. Especially since we have fixed maximum loss due to using options, and we're near max loss now.

The Gartley pattern we're trading has 65-75% success rate, where success is reaching .618AD or higher.

The chart looks discouraging but the decision is to hold. 

Fly United to Gartleyville - Update 6

The daily chart above shows we took a dip this morning but recovered and closed above the 8ema and above the 20sma. This is bullish, and closing above the 20sma could mean we've broken through the resistance its been causing, and now we can leave it behind on our journey to the target.

The next source of resistance we'll have to deal with is the 200sma. I'd expect a bit of a bobble between the 200sma and the 20sma, and finally a break through the 200sma and movement higher.

Fly United to Gartleyville - Update 5

Looks like our patience may have paid off, but its still a little early to tell. What's encouraging for our Bullish Gartley trade is that we have a Morning Star-like candlestick pattern combined with a Kicker-like candlestick pattern. Neither pattern is a clean textbook pattern but they sure are close. Also, we closed over the 8ema and formed a higher low. These are bullish indications.

Looks like we got some resistance from the 20sma. And we still have the 200sma and then the 50sma overhead, both of which could provide substantial resistance.

But we're looking pretty good if you just look at today's price action and the fact that the Gartley pattern is still intact.

As I said on the previous post "We'll continue to hold it until the X point is violated, which would invalidate the Gartley pattern.".

Fly United to Gartleyville - Update 4

Above is the daily chart. You can see we filled the gap yesterday and continued down today, until we bounced off the 78.6% Fibonacci and Bollinger Band. We're still under the 8ema, which is bearish. But we're also still above the Gartley X and D points, which means the bullish Gartley pattern is still valid and working.

So, we're still holding the bullish position. We'll continue to hold it until the X point is violated, which would invalidate the Gartley pattern.

However, we are in a race against time, as the option will expire on August 20th. And its losing a little value everyday due the Theta time decay. 

Fly United to Gartleyville - Update 3

Well, this looks pretty damn sad, for a bullish trade. I would exit, if it wasn't for the fact that:

• Our risk is limited to the cost of the option, which is well within our risk tolerance for 1 trade.
• We are still in a valid Gartley pattern.
• We just filled in a gap.
• Stochastics are not overbought or oversold.
• The longer term trend on the Weekly is upward.

So, I'm going to let this continue to play out. The problem with this strategy is that the option will expire on 8/20/21. We'll need this thing to bounce soon.

Fly United to Gartleyville - Update 2

We're still bobbling around the confluence of the 8ema (orange), 20sma (green), and 200sma (white) moving averages. We closed just above the 8ema. 

The gap in price on the daily chart between 7/20/21 and 7/21/21 might be calling our name, but our plan is to stay long, so long as we don't violate the  X point at 39.17. Our risk is limited to the cost of the Call option.

Fly United to Gartleyville - Update 1

Today it looks like we're in a bobble between the 20sma, 200sma, and the 8ema. This is normal and may last a few days. We closed above the 200sma and 8ema, so I don't see a threat to the long position. Although, we did form a Bearish Harami candlestick pattern, but since Stochastics are still in the mid-range, the pattern doesn't carry much weight.

Fly United to Gartleyville

See the Gartley pattern on the UAL daily chart. You can see the X, A, B, C, and D points clearly marked on the chart. We also formed a Morning Star-like candlestick pattern and closed over the 8ema as well as over the 200sma. We completed the AB/CD within the XA range very close to the 78.6% Fibonacci retracement. Stochastics are mid-range. This is a Bullish set up.

A possible problem with this trade is how price gapped down on relatively high volume into the 78.6% Fib. This is an indication of high momentum to the downside, and it would be more conservative to pass on a trade with this characteristic. The risk is we don't reach our .618AD target before reversing and heading back down. If we get substantial resistance before hitting our target, we should get out early, or at least move our Stop to break even.

Another source of trouble is the possible resistance from the 20sma (green), which we closed directly on today, as well as the 50sma above (red).

Bought a UAL Aug 50 Call for $1.97 just before the market close when the stock was 49.48 and the Delta was 48%.

We'll exit if we violate the Gartley pattern by dropping below the X point at 39.17. If this happens, we'll monitor this chart for the formation of a Butterfly pattern.

Targeting the .618AD level, which is 42.56+.618(63.70-42.56)  = 55.62

Summary:

Entry 49.48 (Call option $197)

Stop 39.15 (shaded by 2 cents)

Target 55.60 (shaded by 2 cents)

By Stock:

Risk: 49.48-39.15=10.33

Reward: 55.60-49.48=6.12

By Option:

The Delta was about 50%. $10.33 stock risk * 50% = $5.17, but risk is capped at the cost of the option, which is $1.97. Reward is about 6.12 * 50% = $3.06. So, for our option position,

Risk: 1.97

Reward: 3.06

R:R = 3.06/1.97 = 1.6:1 which isn't great but hitting the 61.8% Fib as a target on a Gartley pattern is a high probability trade, at least in my experience. So this R:R is acceptable.