Novell, 30-minute Chart
Questions:
1) Why would you be paying attention to this stock on Wednesday, November 12?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Wednesday, November 12?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?
Answers:
1) Because it was unusually active, and very volatile.
2) Up. You’d be looking long.
3) Long at 8.35 on a buy stop above the 11:30 down bar.
4) Initial Protective Stop: 8.22. (max. 1.56%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could sell half, carry half, or just close it all at once.
……….
NOVL was unusually active (it did 29,000+ trades on the day) and gave a very nice, narrow range down bar to execute against, with initial risk at only 1.56%. 4000 shares was a nice drop-in-an-ocean-of-liquidity position size. The stock closed at $8.97 giving a gain of 7.43% from entry for a reward to risk ratio of around 4.75 : 1.
The trouble that some folks have is that they’re always thinking in terms of “2B tops” and worried about getting trapped or picked off, which makes them unable to enter strongly trending markets. Catching big trending days (like yesterday) is where you make the big money. Trying to scalp 2 points a day by gaming the little traps in the S&P futures is going to make you old, tired, and cynical really fast.
The broad market moved up strongly as my intraday sentiment chart indicates (see below), so I was looking long obviously. Anyone who was looking short hasn’t learned the lesson Jim Croce taught when he wrote the popular song, You Don’t Mess Around With The Trend:
‘You don’t tug on Superman’s cape
You don’t spit into the wend
You don’t pull the mask off the old Lone Ranger
And you don’t mess around with the trend’
No comments:
Post a Comment