Retracement Analysis of URC Downward Power Moves

Contents:

• Understanding Retracement in Trading

• Breakdown of URC's Retracement Levels Across Three Downward Moves

• Retracement Probabilities and Key Levels

• Key Takeaways from the Charts

• Final Analysis and Trading Strategy

The analysis presented focuses on three separate downward power moves of Universal Robina Corporation (URC), each of which underwent a retracement phase. The data table outlines key retracement levels and probabilities of rebound, while the accompanying retracement charts visually highlight these key levels.

URC stock retracement levels from the August 2024 power move, showing potential trend continuation points.

URC stock retracement analysis for the November 2024 downward move, highlighting key probability zones.

URC retracement probabilities for January 2025, emphasizing resistance and reversal areas.

---

Understanding Retracement in Trading

A retracement is a temporary reversal in price movement within an overall trend. In downtrending stocks, retracements occur as price moves upward after a significant drop before resuming its downward trajectory. Identifying retracement levels helps traders determine whether a pullback is a continuation setup or a signal for a potential reversal.

Key Retracement Levels:

1. 100% Retracement (Origin/Start) – The beginning of the downward power move.
2. 66% Retracement – The level where price has a 80% probability of resuming its downward move.
3. 33% Retracement – A more cautious zone where price has a 50% probability of continuing downward.
4. 0% Retracement (End of Move) – The lowest price reached in the downward move.

In contrast, a "Sweet Spot - Reversal Zone" lies in the 50%-75% retracement area, where there is a 60%-90% probability of a price rebound.

• Micro Stock Trader’s Adopted Retracement Trading Strategy

---

Breakdown of URC's Retracement Levels Across Three Downward Moves

Trade Duration	5 Days (Aug 2024)	8 Days (Nov 2024)	4 Days (Jan 2025)
Start Date of Power Move	01-Aug-24	06-Nov-24	13-Jan-25
Origin Price (100%)	119.00	101.30	79.15
End Date of Power Move	06-Aug-24	14-Nov-24	17-Jan-25
End Price (0%)	98.10	78.65	67.80
Total Price Range	20.90	22.65	11.35

Retracement Probabilities and Key Levels

1. First Downtrend (August 2024)

   • 100% Retracement: 119.00
   • 66% Retracement: 111.90 (80% probability of downward continuation)
   • 33% Retracement: 105.00 (50% probability)
   • 0% Retracement: 98.10 (Potential reversal or continuation)
   • Reversal Sweet Spot: Between 108.55 and 113.80 (60%-90% probability of rebound)

2. Second Downtrend (November 2024)

   • 100% Retracement: 101.30
   • 66% Retracement: 93.60 (80% probability of downtrend continuation)
   • 33% Retracement: 86.15 (50% probability)
   • 0% Retracement: 78.65
   • Reversal Sweet Spot: Between 90.00 and 95.65

3. Third Downtrend (January 2025)

   • 100% Retracement: 79.15
   • 66% Retracement: 75.30
   • 33% Retracement: 71.55
   • 0% Retracement: 67.80
   • Reversal Sweet Spot: Between 73.50 and 76.35

---

Key Takeaways from the Charts

Each retracement analysis provides the following insights:

First Move (August 2024)

• The price never surpassed the 33% retracement level (105.00), indicating strong bearish momentum.
• This failure to break above 33% reinforced the high probability of trend continuation, confirming the downtrend’s strength.
• The move served as a bearish confirmation, signaling a low likelihood of reversal.
• Short traders should have waited for a shallower retracement before re-entering, as the price did not show signs of a deeper pullback.
• Long traders looking for a bounce should have exercised caution, as retracement failure at 33% often signals further downside.
• Key level to monitor in future setups: The 66% retracement (111.90) was never tested, reinforcing that the bearish trend remained dominant.

Second Move (November 2024)

• Price briefly reached the 33%-50% retracement zone before selling pressure resumed.
• This created an ideal short-selling opportunity, as the probability of trend continuation remained high.

Third Move (January 2025)

• This was a shorter-duration downtrend, with retracement failing to approach even the 33% level (71.55).
• The narrower price range resulted in a tighter retracement zone, limiting opportunities for counter-trend trades.
• Selling pressure was exceptionally strong, causing the price to struggle to find support before stabilizing within the 33% continuation zone and moving sideways.

These insights emphasize the importance of adjusting expectations based on retracement behavior, recognizing when deep pullbacks are unlikely, and aligning trades accordingly.

---

Final Analysis and Trading Strategy

• The 33% retracement level served as a key resistance zone, as price failed to move beyond this level in both August 2024 and January 2025.
• The 66% retracement level was never tested, highlighting the strength of the bearish trend and the absence of deeper pullbacks.
• The failure to rebound beyond 33% suggests that counter-trend trades were ineffective, reinforcing the importance of trend-following strategies over reversal setups in these scenarios.

Trading Decision Points:

• Short positions (continuation trades) remained valid even before reaching 66%, as price consistently reversed near the 33% retracement zone.
• Long positions (reversal trades) lacked confirmation, as price never entered the 50%-75% reversal sweet spot, requiring traders to wait for a stronger bullish signal before considering entries.

This refined retracement trading approach helps traders capitalize on both trend continuation and potential reversals, optimizing trade setups while minimizing unnecessary risk exposure.

---

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

Related Readings

• Micro Stock Trader: The Hybrid 10-Step Trading Strategy: Integrating Retracement for Better Trades

• Micro Stock Trader: Comparing the Modified 10-Step Trading Strategy vs. Retracement Trading Strategy

• Micro Stock Trader Portfolio Tracker Page

• Micro Stock Trader: Revealed: Our Top 3 Shariah-Compliant Stocks for a Winning Portfolio

• Micro Stock Trader: Investing in Semirara Mining and Power Corporation (SCC): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Monde Nissin Corporation (MONDE): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Premiere Island Power REIT Corporation (PREIT): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Asian Terminals Inc. (ATI): What the Technical Indicators Are Telling Us

Mid-Day Stock Analysis: URC's Intra-Day Chart Under Hybrid 10-Step Strategy for January 20, 2025

Mid-Day Stock Analysis

January 20, 2025

The stock market is a battlefield of buyers and sellers, with every price movement telling a story. In this mid-day assessment of Universal Robina Corporation (URC), we apply our Hybrid 10-Step Strategy to evaluate the stock’s performance and determine the best course of action for traders.

Universal Robina Corporation (URC) intra-day chart analysis with key trend and price action

Step 1: Identifying Market State & Trend Context

URC is still in a downtrend, with recent price action showing a steep decline. A slight consolidation is emerging near a possible support level, but the broader sentiment remains bearish. ➡️ Decision: SELL bias, but monitor for potential reversal.

Step 2: Position, Location & Key Retracement Zones

The stock is below key moving averages, reinforcing the bearish outlook. However, there is a minor stabilization at a potential support zone. ➡️ Decision: HOLD (if monitoring for reversal) / SELL (if trend remains weak).

Step 3: Power Bars & Retracement Strength

URC’s recent red power bars indicate strong downward pressure. The emerging green candle is weak, failing to signal a strong reversal. ➡️ Decision: SELL (unless stronger green power bars appear).

Step 4: Entry Confirmation From Both Strategies

There is no confirmed breakout above resistance, and the small green candle suggests hesitation. ➡️ Decision: HOLD (for more confirmation) / SELL (if resistance holds).

Step 5: Tactical Stop-Loss Adjustments

For existing long positions, stop-loss levels should be closely watched. For short positions, a trailing stop-loss is advisable to lock in profits. ➡️ Decision: HOLD (if stop-loss is secure) / SELL (if price nears stop-loss without recovery).

Step 6: Color Change as a Secondary Confirmation

A minor shift from red to green is observed, but the lack of momentum weakens its validity as a buy signal. ➡️ Decision: HOLD (if waiting for confirmation) / SELL (if no strong recovery appears).

Step 7: Profit-Taking Aligned with Retracement Targets

URC hasn’t reached a major resistance level yet. However, partial selling of short positions can be considered due to the reduced downward momentum. ➡️ Decision: PARTIAL SELL (secure some gains on short positions).

Step 8: Re-Entry at Secondary Retracement Pullbacks

A potential buy entry exists if a strong bounce from support occurs. However, with weak buying pressure, re-entry is currently risky. ➡️ Decision: HOLD (until stronger confirmation emerges).

Step 9: Tactical Position Management

The market is showing hesitation, indicating a slowing down of the downtrend. For those holding short positions, partial profit-taking could be wise. ➡️ Decision: PARTIAL SELL (lock in gains).

Step 10: Counter-Trend Trades Only When Retracement Fails

Since the market remains in a strong downtrend, a counter-trend buy is only justified if a strong reversal signal appears. ➡️ Decision: HOLD (wait for further confirmation before a counter-trend buy).

Final Mid-Day Evaluation

• HOLD: If waiting for a clearer signal before making a move.

• PARTIAL SELL: If already in a short position to secure profits.

• SELL: If downward pressure persists without signs of a reversal.

Conclusion

URC remains in a bearish state, and while minor consolidation is happening, it lacks the strength for a decisive reversal. Traders should adopt a cautious stance—monitoring for potential recovery while securing profits from short positions. The afternoon session will be key in confirming whether this level holds as support or if further downside is imminent.

---

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

Related Readings

• Micro Stock Trader: Preparing for Week 4: Strengthening Downside Scenario Modeling and Volume Confirmation

• Micro Stock Trader Portfolio Tracker Page

• Micro Stock Trader: Revealed: Our Top 3 Shariah-Compliant Stocks for a Winning Portfolio

• Micro Stock Trader: Investing in Semirara Mining and Power Corporation (SCC): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Monde Nissin Corporation (MONDE): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Premiere Island Power REIT Corporation (PREIT): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Asian Terminals Inc. (ATI): What the Technical Indicators Are Telling Us

URC Daily Chart Analysis: January 17, 2025 – Sell, Hold, or Buy?

Contents:

• Introduction

• URC Chart Evaluation Using the 10-Step Trading Strategy

• Final Decision: SELL

• Key Takeaways & Next Steps

Introduction

The recent price action of Universal Robina Corporation (URC) has drawn significant attention as the stock continues its downtrend. Using the Hybrid 10-Step Trading Strategy Checklist, we analyze whether URC presents a buying opportunity, a hold signal, or a clear sell indication based on its technical structure, price positioning, and candlestick behavior.

URC's daily chart as of January 17, 2025, shows strong bearish momentum.

---

URC Chart Evaluation Using the Hybrid 10-Step Trading Strategy

Step 1: Identify Market State & Trend Context

✔ Is the market in an uptrend? → ❌ No
✔ Is the market sideways? → ❌ No
✔ Is the market in a downtrend? → ✅ SELL
Analysis: URC remains below its key moving averages (20-MA at ₱76.37, 200-MA at ₱98.15), confirming a strong downtrend.

---

Step 2: Position, Location & Key Retracement Zones

✔ Is the price above key moving averages and near a support level? → ❌ No
✔ Is the price at mid-range with no clear trend? → ❌ No
✔ Is the price below key moving averages and near resistance? → ✅ SELL
Analysis: Price is trading far below both MAs, signaling continued weakness.

---

Step 3: Power Bars & Retracement Strength

✔ Are there strong green power bars near support? → ❌ No
✔ Are there strong red power bars near resistance? → ✅ SELL
Analysis: The chart shows dominant red candles, confirming selling pressure and a lack of strong buying momentum.

---

Step 4: Entry with Confirmation from Both Strategies

✔ Is there a confirmed breakout above resistance? → ❌ No
✔ Has the breakout failed with price moving downward? → ✅ SELL
Analysis: Recent price action failed to break higher and is continuing its downward movement.

---

Step 5: Tactical Stop-Loss Adjustments

✔ Is the price approaching stop-loss without recovery? → ✅ SELL
Analysis: No recovery attempts indicate a continued bearish bias.

---

Step 6: Color Change as a Secondary Confirmation

✔ Is there a shift from green to red near resistance? → ✅ SELL
Analysis: The price structure shows strong red candles, confirming continued downside risk.

---

Step 7: Profit-Taking Aligned with Retracement Targets

✔ Has price reached a major resistance level? → ✅ PARTIAL SELL
Analysis: If holding a position, partial selling can reduce risk exposure.

---

Step 8: Re-Entry at Secondary Retracement Pullbacks

✔ Has price broken below support? → ✅ SELL
Analysis: The break below ₱70 signals further downside potential.

---

Step 9: Tactical Position Management

✔ Is price hesitating at key levels? → ✅ PARTIAL SELL
Analysis: Reducing exposure is a logical approach in a downtrend.

---

Step 10: Counter-Trend Trades Only When Retracement Fails

✔ Is price still in a strong downtrend with no recovery? → ✅ SELL
Analysis: No reversal signals indicate further downside movement.

---

Final Decision: SELL 🚨

Why SELL?

✔ Market is in a strong downtrend with price below key moving averages. 

✔ The price has broken key support levels, confirming further downside risk. 

✔ Red power bars and strong selling pressure dominate the chart. 

✔ No bullish reversal patterns are evident, making a recovery unlikely in the near term. 

✔ Failed breakouts reinforce bearish momentum, indicating further selling pressure.

📉 Final Verdict: SELL before further declines.

---

Key Takeaways & Next Steps

🔹 Short-term traders → Avoid buying until a confirmed reversal pattern emerges.

🔹 Long-term investors → May consider waiting for stabilization before entering.

🔹 Existing holders → Should consider selling or reducing exposure.

🚨 Final Thought: Bottoming is a process, not a single event. Wait for bullish confirmation before considering a buy. 🚨

---

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

Related Readings

• Micro Stock Trader: The Hybrid 10-Step Trading Strategy: Integrating Retracement for Better Trades

• Micro Stock Trader: Comparing the Modified 10-Step Trading Strategy vs. Retracement Trading Strategy

• Micro Stock Trader Portfolio Tracker Page

• Micro Stock Trader: Revealed: Our Top 3 Shariah-Compliant Stocks for a Winning Portfolio

• Micro Stock Trader: Investing in Semirara Mining and Power Corporation (SCC): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Monde Nissin Corporation (MONDE): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Premiere Island Power REIT Corporation (PREIT): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Asian Terminals Inc. (ATI): What the Technical Indicators Are Telling Us

The Hybrid 10-Step Trading Strategy: Integrating Retracement for Better Trades

Contents:

• Understanding the Core Concepts

• The Hybrid 10-Step Trading Strategy

• Final Thoughts

The Modified 10-Step Trading Plan has long been a structured approach for executing trades with precision and discipline. However, traders often struggle with identifying the best entry zones for high-probability trades. By integrating retracement trading principles, we can enhance the 10-Step Strategy with high-probability pullback entries, leading to better trade execution, risk management, and overall performance.

Understanding the Core Concepts

To merge retracement principles into the Modified 10-Step Trading Plan, it is crucial to understand the key market mechanics each method focuses on:

✅ The Modified 10-Step Trading Plan:

• A structured step-by-step trading process.
• Focuses on market state, moving averages, and power bars.
• Includes tactical stop-loss management and counter-trend trading.

✅ Retracement Trading:

• Based on pullbacks after strong price moves.
• Uses probability-based retracement zones (33%, 50%, 66%).
• Helps traders enter at the best possible prices instead of chasing breakouts.

By combining these two strategies, traders can improve trade selection, avoid poor entries, and gain better control over risk management.

• The Modified 10-Step Trading Plan: Enhancing Risk Management and Flexibility

• Micro Stock Trader’s Adopted Retracement Trading Strategy

---

The Hybrid 10-Step Trading Strategy

A More Effective Approach to Trading

The following table outlines the Hybrid 10-Step Trading Strategy, which retains the 10-Step Plan as the foundation but refines entry zones, profit-taking, and tactical positioning using retracement levels.

Step	Action	Key Considerations	Integration of Retracement Trading
Step 1: Identify Market State & Trend Context	Determine if the market is in an Up, Top, Down, or Bottom phase.	Use 20-MA and 200-MA for trend direction.	Check if price is in a single-bar or multi-bar strength move.
Step 2: Position, Location & Key Retracement Zones	Assess price position relative to moving averages and support/resistance.	Look for price above/below MAs and near key structural levels.	Overlay retracement zones (33%, 50%-66%) to refine entry points.
Step 3: Power Bars & Retracement Strength	Identify green power bars, narrow-range bars, and breakouts.	Look for strong volume confirmations in power bars.	Ensure power bars form within retracement sweet spots (25%-45%).
Step 4: Entry with Confirmation from Both Strategies	Enter only if both retracement levels & technical signals align.	Use breakouts, reversals, and moving average confluence.	Avoid trades if retracement exceeds 100%, signaling trend failure.
Step 5: Tactical Stop-Loss Adjustments	Place stop-loss at logical technical levels (recent swing low).	Adjust stop-loss dynamically as price moves in your favor.	Deeper retracements (50%-66%) require tighter stops.
Step 6: Color Change as a Secondary Confirmation	Look for color change (red to green) at support levels.	A color shift near a retracement zone strengthens trade conviction.	If price changes color beyond 66% retracement, trade cautiously.
Step 7: Profit-Taking Aligned with Retracement Targets	Execute partial exits at key resistance levels.	Lock in gains while keeping a core position for further upside.	Exit fully if retracement moves back to its origin (100%).
Step 8: Re-Entry at Secondary Retracement Pullbacks	Re-enter if price pulls back after a failed move.	Only re-enter at high-probability retracement zones.	Retracement to 33%-45% offers the best re-entry chances.
Step 9: Tactical Position Management	Adjust exposure based on retracement depth.	Reduce position size when risk increases.	Shallower retracements (33%) → Larger positions, Deeper retracements (66%) → Smaller positions.
Step 10: Counter-Trend Trades Only When Retracement Fails	Trade against the trend only under extreme conditions.	Use small position sizes and tight stop-losses.	If price retraces 100% and fails, look for counter-trend trades.

---

Final Thoughts

By combining retracement trading principles with the Modified 10-Step Trading Plan, traders can achieve:

✔️ Improved trade selection by filtering low-probability setups.

✔️ Better entries by waiting for pullbacks instead of chasing breakouts.

✔️ Enhanced risk management with tighter stops in deeper retracements.

✔️ More disciplined trade execution based on both market state and probability zones.

This Hybrid 10-Step Trading Strategy provides a structured yet flexible trading methodology that maximizes trend-following opportunities while minimizing risk. 🚀

---

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

Related Readings

• Micro Stock Trader: Comparing the Modified 10-Step Trading Strategy vs. Retracement Trading Strategy

• Micro Stock Trader: Week 2 Trading Update: Detailed Assessment and Outlook

• Micro Stock Trader: My Stock Trading Plan: Inspired by Oliver Velez’s 8-Step Strategy

• Micro Stock Trader Portfolio Tracker Page

• Micro Stock Trader: Revealed: Our Top 3 Shariah-Compliant Stocks for a Winning Portfolio

• Micro Stock Trader: Investing in Semirara Mining and Power Corporation (SCC): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Monde Nissin Corporation (MONDE): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Premiere Island Power REIT Corporation (PREIT): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Asian Terminals Inc. (ATI): What the Technical Indicators Are Telling Us

Comparing the Modified 10-Step Trading Strategy vs. Retracement Trading Strategy

Contents:

• Modified 10-Step Trading Strategy Scenario

• Retracement Trading Strategy

• Key Differences Between the Two Approaches

• Conclusion: Which Strategy Is More Effective?

As we refine our live trading approach under the Budget Ethical Trading Account (BETA), we are evaluating two distinct methods: the Modified 10-Step Trading Strategy and the Retracement Trading Strategy. Each approach offers unique insights into market behavior, risk management, and execution style. This post compares both models, highlighting their strengths, weaknesses, and potential applications.

Modified 10-Step Trading Strategy: Key Support, Resistance, and Risk Management in Action

Retracement Trading Strategy: Using Key Levels to Identify Trend Continuation & Reversal

---

1️⃣ Modified 10-Step Trading Strategy Scenario

🔹 Primary Focus: Tactical trading based on key support and resistance levels with strict stop-loss placement.

🔹 Entry Strategy:

• 67.00 as Key Support Level – Entry only if confirmed by a Green Elephant Bar with increasing volume.

• 71.50 as Hard Resistance – Immediate exit on approach unless volume supports a breakout.

• 65.50 as Hard Stop-Loss – Exit entirely if price falls below this level to prevent further drawdowns.

• 60.00 as Bargain Re-Entry Zone – Potential entry if price reaches this level and shows reversal confirmation.

🔹 Risk Management:

• Volume confirmation required before any entry.

• Stop-loss placement prioritizes capital preservation.

• Focus on real-time decision-making based on price action.

🔹 Main Objective: Capital protection and execution discipline, ensuring the strategy adapts dynamically to real-time market conditions.

📌 Full Analysis: Modified 10-Step Trading Strategy Scenario

• The Modified 10-Step Trading Plan: Enhancing Risk Management and Flexibility

---

2️⃣ Retracement Trading Strategy

🔹 Primary Focus: Retracement-based entry and exit levels using percentage-based zones to predict trend continuation or reversals.

🔹 Entry Strategy:

• 100% Retracement at 104.4 – Origin of power move (October 1, 2024).

• 75% Retracement at 95 & 55% Retracement at 88 – Trend Reversal Zones where price is likely to reject and reverse.

• 45% Retracement at 84 & 25% Retracement at 77 – Trend Continuation Zones, indicating where price could resume the downtrend.

• 0% Retracement at 68 – Current bottom of the power move, which is a potential reversal point.

🔹 Risk Management:

• Focus on retracement levels rather than hard stop-loss points.

• Entries and exits are predefined based on historical power moves.

• No immediate reliance on real-time volume confirmation for execution.

🔹 Main Objective: Strategic swing trading using price retracements to identify optimal trend continuation or reversal zones.

📌 Full Analysis: Retracement Trading Strategy

• Micro Stock Trader’s Adopted Retracement Trading Strategy

---

Key Differences Between the Two Approaches

Aspect	Modified 10-Step Trading Strategy	Retracement Trading Strategy
Trading Approach	Tactical, real-time trading decisions	Predefined retracement zones
Entry Criteria	Based on support/resistance levels & volume confirmation	Based on retracement percentages from prior moves
Risk Management	Hard stop-loss at 65.50, bargain entry at 60.00	No predefined stop-loss, relies on retracement zones
Focus	Active position management & dynamic adjustments	Swing trading with predefined reversal/continuation points
Main Strength	Adaptable to real-time market movement	Systematic approach using Fibonacci-style retracements

---

Conclusion: Which Strategy Is More Effective?

• The Modified 10-Step Trading Strategy is ideal for traders who prefer active trading, risk management, and real-time execution adjustments.

• The Retracement Trading Strategy is suitable for traders focusing on swing trading, predefined retracement-based entries, and trend-following.

• Combining elements of both strategies can provide a more well-rounded trading approach, using retracement zones as guides while executing based on the Modified 10-Step strategy’s real-time risk management.

📌 Which strategy do you prefer? Follow our live updates as we test both approaches in the BETA Trading Account! 🚀

---

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

Related Readings

• Micro Stock Trader: Week 2 Trading Update: Detailed Assessment and Outlook

• Micro Stock Trader: My Stock Trading Plan: Inspired by Oliver Velez’s 8-Step Strategy

• Micro Stock Trader Portfolio Tracker Page

• Micro Stock Trader: Revealed: Our Top 3 Shariah-Compliant Stocks for a Winning Portfolio

• Micro Stock Trader: Investing in Semirara Mining and Power Corporation (SCC): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Monde Nissin Corporation (MONDE): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Premiere Island Power REIT Corporation (PREIT): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Asian Terminals Inc. (ATI): What the Technical Indicators Are Telling Us

Micro Stock Trader’s Adopted Retracement Trading Strategy

Contents:

• Understanding Retracement in Trading

• The Key Levels of Retracement Trading

• Equivalent Discussion for a Downtrend Power Move

• The Sweet Spot for Trading Retracements

• Practical Application

• Tactical Entry Assessment for URC at 68 Level (Week 4)

• Conclusion

At Micro Stock Trader, we continuously refine our trading strategies to align with sound, proven methodologies. One approach we are incorporating into our toolkit is Oliver Velez’s Retracement Trading Strategy, as outlined in his YouTube presentation, "How To Trade Key Retracement Without Indicators" (Watch here).

Week 4 analysis of Universal Robina Corporation (URC) using the Retracement Trading Strategy, highlighting key trend reversal and trend continuation zones. The stock is currently testing the 0% retracement level at 68, a critical point for potential rebound or further downside continuation.

Understanding Retracement in Trading

A market move that shows a strong burst of momentum often undergoes a natural retracement before resuming its trend. The key to retracement trading is understanding when a pullback presents a viable trading opportunity versus when it signals potential trouble.

According to Oliver Velez, there are two types of strength moves in the market:

1. Single-bar strength move: A single large power bar showing aggressive movement in price.

2. Multiple-bar period of strength: A sustained upward or downward trend over several bars.

Both types of moves create key levels that define retracement zones, which traders can use to make informed decisions.

The Key Levels of Retracement Trading

When a stock experiences a significant strength move, it establishes two critical levels:

• Top of Strength Move: This is the peak of the power move, marking the 0% retracement level.

• Origin of Strength Move: This is where the power move began, marking the 100% retracement level.

The retracement occurs when the price pulls back from the peak of the move. The probability of a rebound to the original strength level depends on how deep the retracement goes. The breakdown of probabilities is as follows:

• Retracement to 33% (1/3 of the move):

  • 80% probability of rebounding back to the top of the strength move.

  • Considered a high-probability trade setup.

• Retracement to 50%-66% (midpoint to 2/3 of the move):

  • 50% probability of rebounding back to the top.

  • The risk increases as price moves deeper into the retracement zone.

• Full retracement (back to origin or 100% retracement):

  • 10% probability of rebounding back to the top.

  • A full retracement indicates potential trend failure.

Equivalent Discussion for a Downtrend Power Move

In the case of a downtrend or downward power move, the retracement process works in reverse. The price experiences a strong decline, and a counter-trend rally or pullback occurs before potentially resuming the downward trend. The probability of resuming the downtrend depends on the retracement depth:

• Retracement to 33% (1/3 of the move):

  • 80% probability of price resuming its downward move to the prior low.

  • Considered a high-probability continuation trade setup.

• Retracement to 50%-66% (midpoint to 2/3 of the move):

  • 50% probability of price resuming its downward move.

  • Increased risk as price moves deeper into the retracement zone, signaling potential trend hesitation.

• Full retracement (back to origin or 100% retracement):

  • 10% probability of price resuming the downward move.

  • A full retracement suggests potential trend reversal or trend failure.

The Sweet Spot for Trading Retracements

The most favorable area for high-probability trades lies in the 25%-45% retracement range. This zone offers 60% to 90% win probabilities, making it the optimal entry area for a retracement trade.

By waiting for a pullback into this sweet spot zone, traders increase their chances of capturing a continuation move back to the highs (in an uptrend) or back to the lows (in a downtrend), while avoiding trades that may result in trend reversals.

Practical Application

1. Identify a Strong Move: Look for either a single-bar power move or a multi-bar strength move.

2. Mark Key Levels: Identify the top of the move (0%) and the origin (100%).

3. Monitor Retracement Levels: Wait for a pullback into the 25%-45% retracement range.

4. Execute Trades with Confirmation: Use price action signals or volume confirmation before entering a trade.

5. Set Targets and Stop Losses: Aim for a return to the top (in an uptrend) or to the prior low (in a downtrend) while managing risk accordingly.

Tactical Entry Assessment for URC at 68 Level (Week 4)

Scenario Analysis

Micro Stock Trader is considering a tactical entry at 68 level for 90 URC shares in Week 4. Given the recent downward power move from an origin of 104.40 (October 1, 2024) to a low of 67.80 (January 17, 2024), the retracement strategy suggests that URC is at a critical level where a potential trend reversal may occur.

Rationale for Entering at 68 Using a Stop Limit Order

The rationale for entering at 68 for 90 URC shares is to live test the Stop Limit Order by DragonFi. A Stop Limit Order is a type of order designed to help traders buy breakouts, limit losses, or take profits.

To place a Stop Limit Order, two prices must be specified:

• Stop Price: The price at which the order becomes executable. We are setting our Stop Price at 67.80.

• Limit Price: The highest price we are willing to pay (if buying) or the lowest price we are willing to accept (if selling). We are setting our Buy Limit Price at 68.

This means our order will only be executed at a price that is at or below the Limit Price of 68, ensuring that we won’t pay more than 68 for the stock. This strategy allows for controlled entry into the trade while minimizing slippage.

Strengths of Entering at 68 Level

• Deep retracement suggests discounted entry: A price near the lowest level of the move provides an opportunity for maximum upside potential if a reversal occurs.

• Potential breakout from oversold levels: If buying momentum builds up, it could trigger a move towards the trend reversal sweet spot (88.00 - 95.00 range).

• Clear stop-loss placement: Entry at 68 allows traders to define a tight stop-loss just below 67.80, minimizing downside risk.

Weaknesses and Risks

• Potential continuation of downtrend: The stock may still be in a bearish phase, and a break below 67.80 could signal further downside.

• Limited confirmation of trend reversal: The stock has not yet reached the 55%-75% retracement levels where reversals typically gain momentum.

• Low probability of immediate rally: At 68, the probability of an immediate move back to 104.40 is low, given that it has yet to break key resistance levels.

Probabilities Based on Strategy

• If URC rebounds into the sweet spot (88.00 - 95.00): 60%-90% probability of trend reversal.

• If URC fails to reclaim above 75% retracement level (95.30): Potential fake breakout leading to another downtrend leg.

• If URC breaks below 67.80: High risk of continued sell-off and new lower low formation.

Overall Assessment

A tactical entry at 68 for 100 URC shares presents a high-risk, high-reward scenario. Given that this level represents an extreme retracement, a trend reversal strategy should be confirmed by price action signals (e.g., bullish engulfing, high buying volume). The safest approach would be:

• Partial entry at 68, monitoring price reaction.

• Adding more positions near 75% retracement (95.30) if the trend reversal gains traction.

• Strict stop-loss below 67.80 to prevent deep losses.

Conclusion

While the retracement trading strategy provides valuable insights, it is crucial to wait for confirmation before committing fully to a reversal trade. A tactical entry at 68 could yield significant rewards if the stock rallies into the trend reversal zone, but risk management is key to prevent substantial losses in case of further declines.

Retracement trading is a powerful tool when used correctly. By focusing on the 25%-45% retracement zone, traders can maximize their win rates while minimizing risks. At Micro Stock Trader, we believe this method provides an effective framework for identifying high-probability trading opportunities without relying on additional indicators.

---

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

Related Readings

• Micro Stock Trader: Week 2 Trading Update: Detailed Assessment and Outlook

• Micro Stock Trader: My Stock Trading Plan: Inspired by Oliver Velez’s 8-Step Strategy

• Micro Stock Trader Portfolio Tracker Page

• Micro Stock Trader: Revealed: Our Top 3 Shariah-Compliant Stocks for a Winning Portfolio

• Micro Stock Trader: Investing in Semirara Mining and Power Corporation (SCC): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Monde Nissin Corporation (MONDE): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Premiere Island Power REIT Corporation (PREIT): What the Technical Indicators Are Telling Us

• Micro Stock Trader: Investing in Asian Terminals Inc. (ATI): What the Technical Indicators Are Telling Us