Three Trades Wednesday

Wow, I took three trades in one day! And, two of them were winners, so not a bad day. I still wish I didn’t trade the loser, though. *sigh* So, let’s get that one out of the way first!

LRCX Trendline Break

A ‘trendline break’ isn’t one of my defined setups, so it gets labelled discretionary. And, like most of my discretionary trades, this one didn’t quite work. It almost did, but it was trading too shakily. Here’s the chart:

I think the primary reason I was willing to take the trade was that I had just noticed SPWR took off and ran past its daily number. I thought conditions would be good for LRCX to at least try to do the same thing (it’d need to run past 49). So, I would have sold just under 49. I didn’t wait for it to hit my stop, becuase I could feel how shaky the trading was. It wasn’t even trying to hold above the trendline. The second time it fell significantly below my entry, I was out.

KLAC Ascending Triangle

KLAC was a pretty great looking ascending triangle play (as I pointed out on twitter). Ignore that big upper wick on the first candle, as I think it’s a bad tick, but I’d have taken the play regardless. Here’s the chart:

See how well the triangle is filled in? Here, I’ll show you:

Early on, I was a little concerned that it wouldn’t have enough volume, but as the triangle continued forming, it started looking more and more irresistable. I mean, you can see above that there’s even a (blue up-pointing arrow) paintbar two candles prior to the break, pointing out that this break could also be considered a dummy play! It doesn’t get any better than that!

Based on my general strategy for triangle plays, I should have picked a 25 to 30 cent target. As it turns out, that would have been damn near the top of the move. Booyah! But, I chose a more conservative 20 cent target, and got out a little in front of that, even. Call it easter week jitters. After all, the Q’s are only finishing at 57% of their normal volume, and KLAC was only a tad above its avg.

A huge plus, though: for the second time ever, I pressed a trade. Let’s look at the 3-minute chart, and I’ll discuss it further.

I had said on twitter that I thought it should be easy to get in at 55 due to the amount of shares on the ask there. Turns out, the demand was so fast and furious that I only managed a 55.05 entry. Now, that can be good, or that can be bad. If it’s rabid demand, go ahead and screw me on my fill, I don’t care. If it’s MMs pulling their sell orders to create a price bubble, though, I don’t want to get stuck.

So, when I saw my fill, I put my stop just under 55, on the assumption that rabid demand would not let it fall below the breakout point again. So, it ran to 55.10 and got stuck. I was impressed with the breakout volume, though, so I stuck with it. It re-tested 55, which was fine with me, as that’s a totally normal thing to do.

Then, the question: can it make a new high? If it got stuck at 55.10 again, I was out. If it got through 55.10, the trade was going well, and I could justify adding to the trade. It did, and I did.

Carrying larger size, I was maybe more cautious than I should have been… I could have waited another couple seconds to catch 55.20. But I got out at 55.17 instead. 1.97 R, all told, due to tight stop and pressing with more shares.

The question you’ve got to continually ask yourself is “if this is still a good trade, what should happen next?” And, as long as it keeps doing what you thought it would, you are still good to go! Don’t try to guess more than 1 step ahead… that’s just a waste of time.

XOM Ascending Triangle

This one was a little late in the day for my tastes, but just look at the 2-day, 30 minute chart:

It stopped just under 77 yesterday, and it pressed up against 77 in a much tighter daily range today. Plus, it formed an ok-looking ascending triangle at the number. Gorgeous! I pointed it out to everyone on twitter.

I took the trade, but I hesitated just a little too much pressing ‘buy.’ Damn it! There were 200k shares on the ask at 77, and I wanted to be doubly shure that they were bought, rather than dissappearing. And, when it broke, that sucker broke fast! I was momentarily in “deer-in-headlights” mode, trying to make sense of it. Did the shares all get bought?

That delay, and it was just a fraction of a second of delay, meant I was staring at 77.01/77.03 bid/ask when I finally hit “buy.” I was filled at 77.06. Now, as with KLAC, I don’t mind a fill like that if it’s due to a surge in demand. But, since:

• it was late in the day
• XOM was only doing about half its daily volume.

… I decided to jump right back out. I didn’t want to be in a trade when I wasn’t feeling sure I knew what was going on. I got filled 2 cents higher on my exit, which nets me enough to buy myself dinner, after commissions. It’s important, in those situations, to hop back out while there’s still some momentum left from the breakout. If it turned out to be a bull trap, then another second of hesitation might have meant 6 cent loss, or more. Those bubbles collapse quickly!

As it turns out, I could have stuck around and gotten out around 77.20, so I’ll have to content myself with the satisfaction that I picked a winner, even though I didn’t make the actual money I should have.