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Sound Oil stock (LSE:SOU) has become attractive for lovers of trading and investing. Following a very serious and long-term bearish market, a strong rally took place early this week, as the bearish era peters out. The stock is now expected to continue going up, though that does not mean there cannot be bearish candles. There would often be retracements, even in significantly directional movements. Normal accumulation and distribution territories are considered, since they are the so called support/resistance levels.
Technical Forecast
For this analysis, 4 exponential moving averages are used. They are EMAs periods 10, 20, 50 and 200 (the color that stands for each EMA is shown at the top left side of the chart). The EMAs 200 and 50 confirmed the recent long-term bearish trend. Looking at the chart, we can see that, after the long-term downtrend, the price found it very difficult to form lower lows in the month of September 2012. Towards the end of September, there was a false bullish breakout, which was followed by a short-term bearish run. Starting from October 2012, there has been a serious bullish breakout. Now one question is: When is the best time to buy this stock? In order to avoid a probable false signal, one would wait until the EMA 20 crosses the EMA 50 to the upside and one would buy at the market open the following day. If the EMA 20 does not cross the EMA 50 to the upside, then the present bullish rally remains a false breakout, otherwise one would go long.
As a result of this, more accurate trades are wanted and purchased from those inexperienced bears who wager their sweat in the wrong market direction. In a nutshell, it is far more profitable to go southward when an upside wave into a distribution territory occurs and go long when a downside wave into an accumulation territory occurs. Actually, entering at better prices is also something crucial. That being so, there are killer rules an experienced trader should follow. In all these circumstances, safety rules must be put in place and more returns must be targeted for the part of the portfolio that is put at risk; something that is done logically. Bull markets offer good medium-term profit potential, whereas this entails some skill – especially when it comes to entry and exit prices. The bright side is that you may realize decent returns, fast, and with good risk control to check any contrary move. This is something each stock trader should take advantage of.
Conclusion: The right thing to do with Sound Oil shares is to open long orders when the current bullish wave has been confirmed. The market smiles at you only if you follow its flow and fade its line of the greatest resistance. Smart speculators follow up markets, sell down markets and ignore directionless markets.
This article is ended with the quote below:
“A world in which you have the freedom to fail is also a world that offers you untold riches when success is achieved. This is the world of traders and I make no apology for it. Do not accept what’s going on. In every game there’s going to be a crossroad. When you get to that cross road you can either step up or step down… The fate of your trading future rests in your hands.” – Louise Bedford
