Trading Strategy: Buy Setup at prior low on increased volume. CGNX closed the previous week very oversold, near its low. Volume picked up in the area of the prior low set late January, before it exploded up on a bullish wide range bar. It also overshot its 200MA, which is watched by many traders as an area of support. Previous day it made a bullish Changing of the Guard (+COG), and also had a bottoming tail, showing that the bulls have taken back control of the stock for a bounce.

chart courtesy of Mastertrader.com

Tip: Stocks that close strong after retesting a prior major low on increased volume are poised for a tradable bounce.

The Play: Buy once it trades over previous day high ($18.95). Stop above $18.29 (close of two days ago - open of the previous day). Move stop break even once $.50 in-the-money.

Objective: A move to the $21.00 area. MEDIUM RISK

Play Review:

CGNX did not trigger because of the excessive gap caused by positive earnings. If the gap was less than 50 cents, it would have still been considered as entry within play limits.

RS at Reversal Time         Climatic Buy Setup #2