Morgan Stanley: Time to Short Again?

morgan stanley 27 Sep 2011

On 22 Sep, Morgan Stanley formed a hammer. What made it significant is that it gapped down from the prior day. Market had a massive sell-off after Fed chief, Ben Bernanke announced “Operation Twist”. Market already expected it and there were no more unexpected good news. So, a typical buy on rumors sell on news.

Normally, there will be a reversal after heavy selling. The hammer candlestick gave me the first hint and it was also located at the lower channel support. I waited for the confirmation the next trading day. The next day was a bullish white candle. I went in at $13.73 (long position)

After 3 days of rally, yesterday it formed a bearish shooting star. Price stalled at the channel’s resistance and closed below the 20-day moving average also. I covered my position at $15.16 yesterday.

Stochastic is not showing overbought. But do you notice that the previous 2 times when it was hitting near the channel resistance, the stochastics readings were also halfway up only, price still went down.

So after going long and covered my position yesterday, I go short. Will Morgan Stanley goes down the next few days? We shall wait and see.

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