Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading
Shares of Open Orphan PLC (LON: ORPH) fell for the second consecutive session falling back into the trading range we discussed in mid-January. At the time, we noted that the stock was in the middle of the range, which did not give us a good buying opportunity.
Open Orphan shares kept falling up to early February when they reversed course and started a new uptrend triggering a good buy setup. The shares then rallied and broke above the resistance line we had drawn on the chart on Monday.
However, the break did not last as the shares have since broken below the level and seem to be headed lower. We pinpointed the level in January because it marked a reversal point where a bullish trend ended, and a bearish one began in the past, as shown below.
The rule of trading a sideways price trend is to buy at or near the top of the range and sell at or near the bottom of the range. The rule works most of the time, but not every time, therefore, traders should always use stop-loss orders to limit their losses in case the trade moves against them.
In this case, I would open a bearish trade on Open Orphan and have a stop-loss order above the recent highs at 32p. For those looking for buying opportunities, they could arise if the stock reverses and crosses back above the 29p level, or near the bottom of the range at 22p.*
Those who profited from the latest rally may find that now is a good time to take some profits off the table.
Positive or negative announcements from the biotech company could determine its future direction.
*This is not investment advice.
Open Orphan share price.
Open Orphan shares fell back below the crucial 29p resistance level and are firmly within the sideways trading range.
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