I noticed a huge number of "hammer" patterns while reviewing the weekly charts this weekend. A hammer is a bullish Japanese candlestick pattern which describes a small body (white or black) near the high with a long lower shadow and little or no upper shadow.

What I'm showing in the charts above is how this reversal pattern forms: when you drop down from the daily time frame to the intraday time frame, you can see how that July 2nd hammer shaped up. The stock opened at $34.60 and dropped a quick 7% to around $32, but then it reversed and climbed steadily into the close to end the day near unchanged. This is obviously bullish.

If you were looking to take a long position for a trade, you could set a buy stop above the high of the hammer and protect yourself with a sell stop below the low of the hammer. Once you had a decent move in your favor, you would move the protective sell stop up to breakeven, and then trail the stop in coming days to lock in further gains if the stock continues to move higher.

One simple way to trail a stop is to place it below the last "up" bar... an "up" bar is simply a bar with a higher high and a higher low than the previous bar.

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Chairman MaoXian