Today was a strange day in the markets, with few gapper opportunities showing up on my trade-ideas scan. Oddly enough, my overnight scans were also on the light side (the PDF book I generate each night only had 15 pages… it’s usually twice that big).
But, one of the stocks on my personal scans was CERN, since it was edging up against 54.00 as a short play. 6 minutes into the open, it fell to 54 with a 2-cent spread, so I shorted it. I felt good about it initially because my biggest problem with playing the open is how wide the spread can get on stocks. I am allergic to losses, so I stay away from big bid/ask spreads.
I got in at my price, 54, and put my stop at 54.02. Especially since it was a short play, I wanted that sucker to fall hard and fast away from the round number. Initially, I got what I wanted. It fell a good 10 cents, anyway, without looking back up. But, two things were all wrong.
- the volume wasn’t pouring in.
- the spread was getting wider, with no trades printing
As I said on my jaiku post, “when in doubt, get out.” So, even though the markets were looking bearish, and even though the trade was going my way, and even though I would have to eat a 7-cent bid-ask spread… I got out at the market for a 12-cent gain at 53.88 (6R… damn scalps sound impressive in R terms!).
The 3-minute chart:
This is seriously about the best exit possible. I could have maybe gotten two more cents, but the ask never got anywhere near 53.81 while I was in the trade. 53.86 was about the best possible covering price.
I considered trying to get a better price via a limit order, but that has never worked for me. Does that ever work for anyone, and the price doesn’t go on to much better prices? I always say getting out via a spread-splitting limit order only works well when you could have made a lot more money than you did. Maybe others have more luck with it. I’ve found that (in this short-covering case, for instance) it just shows my hand, and makes it look like there’s bullish buying activity with someone bidding for thousands of shares. This causes others to bid the stock up above my bid, and at that point I’ve actually encouraged the price to run away from me!
If you look at the rest of the action on CERN, you can see that it went above 54 for quite a while before falling at the end of the day. So, no complaints. It would turn out to be my only trade today. I went out and ran some errands, but after I was back I still didn’t see much I liked. Hopefully tomorrow will be nicer.