TNA Targets

In order to trade TNA, one needs to determine a target, an initial stop loss, and calculate a reward:risk ratio (requiring a minimum 3:1 to trade). If the trade calculates favorably, one then decides an entry and exit strategy, with the exit strategy covering all contingencies.

First, Point & Figure Charting provides a manner to calculate a target, but doesn't provide any timing. In this case, the breakout of TNA provides a target of 43. Calculation of Point & Figure targets are not covered here, but can be learned as desired. An easier way is to allow online services to calculate it, which is the manner used here. Key in the symbol desired and allow it to perform the calculation. However, best practice is to confirm the calculation in an alternate fashion.

TNA has just confirmed a Double Bottom pattern with yesterday's price action. A double bottom looks like a W, and is confirmed when the right-most price closes above the price of the middle peak. In this particuar case, the middle peak is 28.10, so the close at 30.12 definitely confirms the pattern. To calculate a target, one uses the highest peak price in the pattern (28.10) minus the lowest price (22.73), then adds that result to the highest peak (28.10). In other words, (28.10-22.73) + 28.10 = 33.47. This pattern normally meets its target 66% of the time, fails to make breakeven only 5% of the time, will retest its breakout point (28.10) 64% of the time, and rises an average of 35% (28.10 x 1.35 = 37.94). Using the more conservative target and a stop loss of 28, the reward:risk ratio calculates as (33.47 - 30.12):(30.12 - 28.00) = 3.35:2.12, which is less than the required 3:1. If the price does retest the 28.10 level, the reduced entry point makes the trade work: (33.47-28.10):(28.10-28.00) = 5.37:0.10. Note, however, that prices gaped yesterday, and usually gaps are retested. If so, yesterday's low (28.54) can be used as a limit order entry, and would give a reward:risk ratio of (33.47 - 28.54):(28.54 - 28.00) = 4.93:0.54 = 9:1. That works.

Best of all, TNA qualifies as a High, Tight Flag, the most productive and reliable pattern. Its breakeven failure rate is virtually zero, failing less than 1% of the time, while providing an average rise of 69% and meeting that target 90% of the time. A high, tight flag requires a doubling in price (29.80/10.21 = 298%) in the two months prior to the onset of the flag (29.80). Target calculations are (a) 22.73 x 1.69 = 39.41, (b) (29.80 - 10.21) + 22.73 = 42.32, and (c)(29.80 - 10.21) x 69% + 22.73 = 36.24. Even the most conservative target provides almost a 3:1 reward:risk ratio (36.24 - 30.12):(30.12 - 28.00) = 2.88:1. An entry at the gap-retest level (28.54) provides more than enough to satisfy the 3:1 reward:risk condition.

Often, after a dramatic up day, a pause day will follow, allowing one to gain entry at an acceptable price. Two retest points are indicated in this situation: 28.54 to retest yesterday's gap, and 28.10 to retest the inner peak of the double bottom. This morning's futures indicate a potential opening to the downside of yesterday's close, thus a pause day or at least a pause opening. By setting a limit order to buy at 28.54, one assures an acceptable entry, if the entry is executed. If so, the initial stop loss can be set at 28.00, then moved up to just below the gap (28.50) once prices move higher than yesterday's high.

If the pause doesn't drop the price to the desired levels, it bodes well for eventual performance. To get aboard one can purchase on breakout. The price usually starts down, then turns if profit takers are quickly exhausted. To protect ones reward:risk ratio, one merely using a higher stop loss, placing it just under the low point of the day, then raising it each day until stopped out. One can thereafter re-enter when a short-term corrective action permits.

The target price from the double bottom represents the next spurt up, while the targets from Point & Figure and the High, Tight Flag are longer-term targets of several spurts upward. Times estimates of the immediate spurt would be one-to-three weeks, with longer period being two-three months.

TNA appears to mimic a textbook case of Elliott wave, with five waves up followed by an ABC correction. The C leg down was not as deep as the sample Elliott diagram, indicating a stronger than normal equity. Should this clarity continue, trading TNA will be child's play--not to mention profitable.

This graph shows the Elliott wave superimposed on TNA. It also changes the Bollinger bands to their norm of 20-days and shows how well MACD calls the turns. On the normal Bollinger, TNA respected the 20-day moving average centering the Bollingers. During the upward movement, it contained the downward excursions at points 2 and 4.