The losing trade on C.H. Robinson Worldwide, Inc. (Nasdaq: CHRW). This may be the longest I’ve held a stock in my daytrading career! The chart:
Reasons I think this was a decent trade:
- Markets opened down, and kept going down all morning
- This was the only short candidate that looked clean to me on the daily charts. Many many other stocks were going down, but they were going down right into support areas.
- Even when the markets turned up around 11:30 or noon, CHRW stayed down. Many other stocks I might have shorted would have chopped me right out.
- I stuck with my plan to hold out for larger gains. I gave up at least four chances for 0.3R, and two chances for 0.6R. Something was holding the stock up to 42, and it seemed like I had reasonable chances that they would run out of ammo at the end of the day. I checked, and there were no options on CHRW with a 42 strike, on the extremely off chance that there was early pinning action on this of all stocks!
Clearly there was support at 42 (I was laughing all day about the Plunge Protection Team or whatever it’s called!). But, since it was underperforming the rest of the market all afternoon, it seemed premature to give up. Trading in such a tight range all day, I thought it would either run up, or sell off at the close. So, I tightened my stop and let the chips fall where they may. Turns out, it did both. Too bad it ran up first! :-) Took me out for a 0.48 R loss.
So, let’s talk about my stop. Had I left my stop alone, I wouldn’t have been stopped out, and could have closed for a small profit at the end of the day. As time wore on, though, I decided to tighten up on it, since it hadn’t pushed past 42.04 for hours. I moved it to 42.15. I don’t know if this was a bad decision or not. I felt like a move past 42.15 would severely invalidate my assumption that support at 42 would give way. I think I did right, and was a victim of end-of-day chop.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| CHRW |  |  |  |
October 17th, 2006 at 6:44 pm
JUst trying to understand your shorting strategy! Why didnt you short on 3rd candle when it broke the initial range? rather than wait till 10am reversal/support area!
October 17th, 2006 at 7:00 pm
I guess our concept of initial range is different. On a five minute chart, I consider the first 6 candles to be the initial range. Rather than short right then, I waited to see if it could fall through round number 42. It did, but it sure hit a brick wall after that!
The strategy was the break of 42, and the hope was that it would continue to fall sufficiently that any 10:15 reversal would be well below entry (would have seen resistance at 42 regardless).
It’s a real phenomenon, the 10 to 10:30 reversal, but I don’t plan my day around it. If a stock is falling hard enough, that reversal amounts to a blip. See AMR or CAL today, for instance. So, I size my stop for it, but I don’t wait. If it never happens, I’ll have missed the trade.
October 17th, 2006 at 8:05 pm
Thx for the explaination, I was just trying to understand as I am still learning the game :)