Turtle Soup Plus One
Tools Candlestick/Bar Chart
Trade Setup This pattern was popularized by Larry Connors and Linda Bradford. Now everyone knows the original turtle trading system where shorts were initiated when new 20 day lows were made and longs were initiated when new 20 day high was made. The problem with turtle trading system was that it had many false signals. This pattern tends to capitalize on these false moves.
Buy Setup - The typical buy conditions are as follows. The market makes a new 20 day low with the previous 20 day low being atleast 3 sessions ago. The current close should be near or below the previous 20 day low. Following this, the next day market rebounds and trades above the previous low (ideally should close above the previous low). Enter the stock by placing a stop at the previous low. This offers an excellent risk to reward ratio.
Time Validity - This pattern has to be looked for on daily charts. But the trading time frame should be of 3-5 days. Book profit after 3-5 days.
How to trade it - As most of my previous examples, I have again picked a stock which has recently formed this pattern. I recommended Balrampur Chini as a buy in my swing trading thread. And this was precisely why. Look at the chart below. Balrampur forms a 20 day low (Rs 90.3) on 25/03/2010. After this the stock rallies a bit and then again makes a new 20 day low on 1st april 2010 (Rs 87.7). Now, on the next session the stock closes at 90.8 which is above the previous low of Rs 90.3. We enter here placing a stop at 87.7 and trade on the long side. Currently the stock is trading at Rs 99 which is about 10% gain in 6 trading sessions.
Target - Target is specified in time. Book profits in 5-6 trading sessions.
STOPLOSS - Previous Low made.