In this morning’s letter I mentioned G-III Apparel symbol GIII. It had fallen very hard yesterday on news.
The focus from the letter was to buy GIII because it has fallen so far and into an area of Major Support.
The plan was to wait until a buying price pattern formed on a 5-minute time frame or one lower. Here is what I did.
Above is the chart I showed in this morning’s letter.
The Day Trade Time Frame Used can Change Later in the Day
Below is the 1-minute chart I use for a morning day trade.
GIII gaped lower again at the open (not shown) and then continued to drop. That making GIII even further extended to the downside and likely to have a short-term recovery. Now I wait and watched the price action, as well as the price action in the broader markets.
The chart below GIII displays the S&P 500 ETF symbol SPY in the same time-frame. Ideally, any stock being focused for trade is moving in the same direction as the broader markets.
Early on the two were doing just the opposite, GIII was moving lower and SPY higher. My thoughts at the time were that the strength in SPY would eventually pull up GIII from its extreme move lower.
After watching the price action for a while in GIII. It seemed to me that sellers could care less what the broader markets were doing. They just wanted out of GIII. Panic…
Then at the time of the first reversal period (9:50 – 10:10) GIII had a break to new lows and immediately recovered. That was the first sign that selling might be exhausted. Then GIII started moving sideways and that was exactly what I wanted to see.
It was a classic downside shakeout and recovery. At that point, I felt the odds were good for GIII to move up for a short-term move against the prevailing trend.
Counter-trend trades are are taken for a short-term profit
On the above chart, you can see several arrows. The one sideways was a guide for where prices would be breaking out of the consolidation after the shakeout.
The arrows pointing up show the small green triangles that were my entries. The first on the breakout and then the second an add on the little dip.
The target was the horizontal line above. That line was aligned with a prior high (not shown) that you can see on your own chart of GIII.
Once GIII reached that line I wanted to sell part of the position. However, I decided to sell it all. Reason being, the markets were flat and weakening while GIII moved up. Yes, GIII showed relative strength at that time; however, remember this is a stock that has been crushed and this was a counter-trend trade. So…. Take the Money.
Hope this overview helps you in your own trading.
All the best,
Greg Capra
Founder of The Pristine Method of Trading
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