Entercom (ETM) has presented a great buying opportunity right now as of 12/3/2018. The trade setup is my Lightning Trade setup using the one hour charts. Normally I would have my exit set just below the 50% Fibonacci retracement level. But for this trade I will be getting out earlier. The reason why is because price has created a significant support and resistance zone. Right now price is near the bottom of the zone.
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The Entercom (ETM) Setup
The trade setup is my Lightning Trade Setup that I have been using for 90% of my trades I take. You can see the grey box where my exit would normally be just under it.
But what Entercom (ETM) has done is create a very nice support and resistance zone. So rather than waiting and trying to play the break-out game I have my exit closer to the top of the zone.
You can see from the blue circles is where the setup originated. The red lines are the support and resistance areas. For these charts I used the Daily time frame so it would be easier to see. But for the actual trade I am using the hourly charts.
From the charts you can see how price is near the bottom of the support zone.
Entries and Exits
Here you can see where I entered around $6.60. This is a trade I went live with today and bought. It is near the bottom of the support area. My exit is at $8.00. Why didn’t I put it closer to the top of the zone around $8.50? Because last time price retraced once it hit just above $8.00 so I’d rather get my money out with a nice sized gain than hope it reaches closer to the very top of the channel.
I have no problem getting in a little late and getting out a little early. Normally with the Lightning Trade the exit would be just south of the 50% Fibonacci retracement level which is around $9.90. Since that would take a break-out I’m not playing that game so I’ll exit at $8.00 for a nice gain.
If price goes lower then I will add to it around $4.70 which is the 423% Fibonacci extension area from the blue circles which is where I am measuring from for the Lightning Trade setup. Right now price is just south of the 261% Fibonacci extension area which is a huge move for the Lightning Trade Setup to not have a retracement.
On the Daily time frame you also have divergence in the MFI (Money Flow Index) so that can be another signal that a move to the upside is coming up soon. I don’t trade based upon the MFI but it does provide good clues as to when price could turn around. Just like every indicator it doesn’t work every time which is why I don’t base my decisions off of it. It is just for a little assistance.
In the chart above I put the Fibonacci extension levels so you can see where price is at with them. Being down to the 261% Fib extension level is HUGE for the Lightning Trade setup.
This is a “free trade.” What is a free trade? I call a free trade when price moves below an exit level that I will not move no matter how much price moves against me. Since the exit level for the Lightning Trade is $9.90 with price currently around $6.60 then this is a very nice free trade. Even though my exit level is closer to the top of the resistance area at $8.00.
Conclusion
For this trade I am not getting out at my normal Lightning Trade setup exit. I would rather get out near the top of the resistance level then wait to see if price breaks through. It could very easily retrace back down after hitting the upper level. If it does I will look to get back in near the previous bottom again. Rinse and repeat.
If I miss the breakout then no big deal. I would rather get in and out. Not have my money tied up in the swings waiting for the breakout.
Etercom (ETM) also provides a very nice dividend of 5.39% https://finviz.com/quote.ashx?t=ETM so if this trade takes a couple of weeks or months then at least I’ll get a little something for having to wait for the move.
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