Another Quick Trade: RIMM Short

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

I traded Research In Motion Limited (USA) (NASDAQ: RIMM) today as a Trader-X inspired gap play. I say inspired because I used tape reading principles to gauge the entry rather than just following prints of the candlesticks, as Trader-X does / did.

The Setup

I had a bearish bias this morning, and wanted to short AAPL given the hanging man on the daily yesterday, pointed out by Jamie. It shot up like a green rocket and never looked back, so I was looking for something else. I saw this setup forming in RIMM:

A selloff on increasing volume yesterday, followed by a gap down, a weak bounce and 5-ema overhead resistance. I traded on the 5 minute timeframe, because that is where the setup occurred for me, though my entry was assisted by the 1 minute chart. The 138% fib was my initial target at $210.85.

The Trigger

the 5 minute gave me my entry level at the OR low, but I entered by watching the 1 minute chart for confirming signs of a good breakdown:

As price leaned on the OR low, bigger volume came in and I went short at market. I got a crappy fill–about $0.30 slippage from the price when I sent the order. Just as Richard discussed in his article, the MM’s dropped the bid big and I jumped right into it. Trader-X would only enter on a completed candle, and so he would have missed my entry on the 5 minute (it was worse on the 15′–huge wide range bar) and went on to look for another opportunity. Who am I kidding? More likely he would have entered on a break of the 5′ 4th candle low and banked coin. For a minute or two, RIMM looked like it would reverse, and I would have sold the bottom tick. But price decayed, and then more volume came in, carrying the trade down.

Trade Managment

There wasn’t much to manage on this one. It dropped solidly in my favor after the first couple of minutes, and by the time I was ready to move my stop to breakeven, we were crossing the target threshold. I goofed on my cover order (I wanted to cover when price overshot the target and was near $210.50, but I forgot to enter my password), but I still managed to get filled at the target of $210.85:

Takeaway

Notwithstanding some MM games and my minor screwups, I still managed to pull out 1R profit. I’m just glad to be consistently winning! The R’s will add up if the losses are small, which is where I need to focus. I’ll have a trade go awry sometime in the near future, I’m sure, and I really need to manage it closely to keep the loss small.

Trade Summary:

RIMM Short
Entry: $212.36, Stop: $213.36, Target: $210.85
Exit: $210.85, P/L: 1.08R

Trade Grade:

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