This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I traded Cephalon, Inc. (Public, NASDAQ:CEPH) today, as an OR breakout. Due to my poor performance the last couple of weeks, I approached this trade with caution, meaning a later entry, a smaller R-size and conservative profit taking. There weren’t a lot of setups out there today, but later I saw CEPH break above the OR high, along with the magic 5-ema:
I looked at the daily chart to get a gauge of resistance to judge my 138% fib extension target:
I saw heavy potential resistance around $76.00, so I made that revised my target level. I didn’t think it would ever make the 138% fib based on the rate it was moving at the time. Here’s a tick chart showing my exit (and the aftermath):
The BAV Trend seemed to move exactly opposite to the price action, so that wasn’t any help. As CEPH stalled at $75.90, I decided to take profits. As Richard said,”Trying to eek out ‘just a little more’ profit is a suckers wishful thinking”. Soon after, it went on to hit the 138% target. Not enough wishful thinking today, I guess! Still, I followed my plan and my cautious status, so I’m pretty happy with the trade. If anybody sees any clues that I missed that would have indicated that CEPH would hit the 138%, please leave a comment!
Trade Summary:
CEPH Long 56 Shares
Entry: $75.30, Stop: $74.97, Target: $76.66
R: $18.48, Exit: $75.90
P/L: 1.82R, or $33.60
Trade Grade:
In the text you say your target was 76.00, then in your summary you say it was 76.66. The only target that matters is the one you picked before you got in, so I believe your text. In that case, you got out just shy of your target… what could be better than that? No sense wondering if another target would have been better.
If, when it broke 76, you suddenly believed it was headed for 76.66, then you should have gotten back in (if your number of allowed daytrades would let you), and tried to capture that leg of the move. I have trouble jumping back in, but I still think it’s the right answer.
Let me explain– no, there is too much. Let me sum up:
The target in the summary is what I use to determine if my trade is “worth it” to take. I look for a 3:1 Reward/Risk ratio before entering. After I was in, I started to think that the $76 round number (which was near the 119% level, and many of my Trader-X style picks stall out here) would be the best I would get, so I revised the target down, and down again when I got out at $75.90. I didn’t use the time-based stop, since the daily close would be more restrictive. And yes, I’m watching the day trades so I didn’t re-enter.
Exits (other than stop losses) are a huge obstacle for me! The only two bad marks I can give myself on this are the late entry and failing to capture all of the potential profit, and if that’s all I did wrong then this time I’m pretty happy :)
Prospectus, thanks for the reply in Wall St. Warriors blog. I noticed you use a 30EMA for volume. I am trying to find out what the “best” EMA would be for volume in 15min bars. Also noticed you used P bars in your volume. What are those? Lastly, if you see the price breaking the OR in lets say 15min bars, do you wait until the bar is fully formed even if theres 14 minutes left until the bar is formed? Thanks a bunch for the info!
Congrats Prospectus,
As you noted the field was bare this session, so it was nice to be able to grab such a nice move on CEPH.
@nnasdaqqq: I picked 30 for my volume ema because it seems to damp the oscillations well, but is still fairly responsive to large-scale volume changes. I don’t think the exact level is critical, and if there were one “best” level, then the whole concept would be a fluke rather than an underlying phenomenon.
The P bar is short for paintbar, which is a feature in Quotetracker. Search here on MTM to find out more about it. My specific paintbar just paints an orange background behind volume if the volume is more than the 30 ema, signifying above average activity.
About the OR entry, It’s one of my rules to only trade from completed candles. I follow it 95% of the time. I’ve seen price peek above and then turn around in the last second, and I’ve top-ticked too many stocks. I now try to only look at the patterns of the past, as they don’t change.
@Jamie: Thanks! BTW, I’ve started using your two-tick rule for entries and stops, and it’s helping. I wish I were half as good a trader as you are!
Nice trade!
Thanks, man!