Trading the Channel Around a Fortress

• Posted by Greg Harmon
• on January 8th, 2014

Fortress Investment Group, $FIG, has been moving higher in a rising channel since February. A bounce off of the top sends it to the bottom and then it moves back higher. Currently it is set up for a good reward versus risk trade to the upside. The chart below shows that the stock is trying to break the 8.80 resistance area from October. It has a bullish Relative Strength Index (RSI) and a positive MACD that support a continuation higher. And all that comes with a consolidation zone between 8.50 and 8.67 below. You can look to play this either one of two ways toward the top of the channel at 9.35. The conservative way would be to use a stop in the consolidation zone, say 8.62, and buy the stock at

8.74. This gives a reward to risk ratio of 5:1 on a sell at 9.35. The tighter stop allows for a sizeable trade as you are only risking 12 cents. The longer view would be to use a break of the bottom of that channel at 8.50 as a stop, say 8.46. Risking 28 cents in this trade means a smaller position size but still carries a better than 2:1 reward to risk ratio, with more wiggle room for the stock. Which better suits your trading style?

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