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Trying to visualize a future for Tenet Healthcare

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I've talked before how a trader can actually try and "visualize" the future trading of a stock based on all the tools a trader has and should try to use to map out a trading plan. Simply planning a trade sometimes isn't enough and it may help to actually try and visualize how a stock may trade in the future.

Recent commentary in today's market monitor has some subscribers wondering just how in the heck I came up with a retracement bracket as outlined in my comments. Here's a quick look at the bar chart and we will build from there with the point and figure chart.

Tenet Healthcare Chart - Daily Interval

It's very "fun" to work on bar charts and put some trends and levels on the chart. When stocks are breaking to new 52-week highs, I like to use the "rolled up" retracement technique. All a trader is doing is identifying levels that look to have been meaningful in the past, try and "shadow" those levels with retracement and the forecast higher levels that may eventually come into play. It's rather "obvious" that the $52.49 level was some type of bullish level in THC back in August and September of last year, so I anchor retracement there. Then, "out of nowhere" the stock found resistance at $66.40. Ok, so there's a meaningful level, so attach 38.2% retracement there. Now, do the "resulting" 50%, 61.8% show any type of "impact" on trading? I think so, therefore I become happy with this retracement. Now, does $88.91 seam a little too bullish? Sure it does. But, I fell out of my chair when I went over to the point and figure chart and did some "imagining" on what could take place in the futures. What I found is the potential that a pending "buy signal" could create a bullish vertical count that hints at $89. But there's some work to be done.

Tenet Healthcare Chart - $1 box

THC is still showing a bearish vertical count of $64 with its point and figure chart. Traders/investors need to understand that and assess risk accordingly in their account management. A case for bullishness could be envisioned as outlined in the above chart. It would be that the recent market environment had some jittery bulls taking some profits in the stock, which created a near-term supply/demand shift that created the sell signal. However, the "ramping up" MACD on the bar chart hints of higher price action and a trade at $76 in THC would generate a "buy signal" (column of X exceeding a previous column of X) and thus create a new bullish vertical count. I've tried to show how the stock might trade with "?" to have such a scenario come into play.

Jeff Bailey
Senior Market Technician
Option Investor

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