I’m Out–There’s Bad News and Good News

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I closed out both of my swing positions this morning. My task now is to finalize my swing system and set up the plan. Here’s how the trades turned out:

The Bad News: Nuvelo, Inc. (NASDAQ: NUVO)

I looked at the weekly chart to get a target. I wanted $5.00, but I thought I could get to a retest of the high after the huge gap down in December:

The trade idea was sound, but I was too large in the position. NUVO gapped up big on Tuesday, and then sold off through the rest of the day. I set an alert for $4.00, and later in the afternoon it rallied back up to that point. It waffled a bit, and then jumped over the line at $4.05. I bit too soon–I should have held out for $4.10 or so to make sure it would move, but the round number got me again and I bought like a sucker. The bad entry is bad, the position size makes it really bad.

After entry, I was watching the BAV trend I talked about yesterday, and I saw a divergence between price and the trend:

I read this as people bidding up for the stock even in the face of the decline in price, and I thought it would lend support the next day (today). But I was wrong, as it was offered away this morning. Any insight into what I saw and what it means out there?

Trade Summary:

NUVO Long 120 Shares
Entry: $4.05, Stop: $3.70, Target: $5.00
R: $42.00, Exit: $3.70
P/L: -1.00R, or ($42.00)

Trade Grade:

The Good News: Solar Enertech Corp. (SOEN.OB)

As I said before, I entered SOEN as a swing trade. Here’s the completed chart:

My idea was to buy after a break of an NR7 day’s high, and then ride for another 7 days maximum, or until my target of overhead resistance was met. I was in the black after the first day, so it was proven correct in my mind. This morning my NUVO loss was weighing on me, and I decided to aggressively protect my profits, rather than let it have more fluctuation room. I was watching the BAV trend on this chart:

There were still a lot of shares going at the ask in the face of the decline, so I stayed with it, but after it recovered and ticked up to $1.75, I took the profit–I wanted to respect the round number, and I wanted to book the profits to counter my losses. I could have had more had I stayed (and the BAV trend took off after $1.75 signifying buying pressure), but at least I covered the mistakes of this week with this trade. In the trades I took after FMT, I am now positive in the amount of $5.20 :)

Before I took NUVO, I was deciding between adding to SOEN or taking the new trade. I thought diversification was better–Whoops. But this did lead me to some thoughts about adding to positions and Phantom of the Pits’ Rule #2, which I will post about separately.

As an aside, I have usually traded in tiny sizes in big stocks, so I have never seen my order go across the tape. This is the first time it happened for me, and I thought it was kind of cool:

Trade Summary:

SOEN Long 333 Shares
Entry: $1.53, Stop: $1.41, Target: $2.00
R: $39.96, Exit: $1.75
P/L: 1.83R, or $73.26

Trade Grade:

Thanks for reading!

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This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com