The idea here is to go back through my watchlist stocks, and say what I would have done in the best-case scenario. The goal is not to fantasize about catching every big move, but to find actual setups that fit my style, and describe the way I’d like to be managing my trades (though so far I have been more conservative than this in real life trades). It’s to help me find better ways to use my own lists, really, and to reassure myself that there are lots of good plays in them to be made.
I’m going to start doing these posts… not every day, unless there is huge demand for it. But, from time to time.
Trade 1: NVDA
Today I took the rest of the day off around noon EST… the setups I was waiting for just weren’t happening. But, the ultimate trader would have persevered. I was watching for NVidia Corporation (Nasdaq: NVDA) for a break of yesterday’s high (which corresponded pretty well with today’s OR high, and you should know by now that I like those odds). As it was options expiration day, my target would have been 37.50 (nearest strike). Had I stuck around til the close, I would have gotten my entry, and hit my target right away. Because of the size of the run to the break, this would have been a 1:1 Risk/Reward trade… only take these if you have a win rate that supports it!
Trade 2: XMSR
Another trade I was waiting for, but gave up on, was XM Satellite Radio (Nasdaq: XMSR). Again, I differ from the ultimate trader, who would have kept watching. This one’s not perfect, because I have to consider the first hour as the OR, rather than the first 30 minutes. But, with that adjustment, we have yet another OR high near yesterdays high-of-day. Plus, it was hanging out around the 30-day high of 15.50 that it just barely broke yesterday. So, this trade had a lot of things going for it.
My entry would have been around 15.65, with a stop at 15.50 (or maybe a couple cents below that). On the next bar, I got a significant move up, so I move my stop to allow it to retrace no more than half the move. Then, it hit 16 but fell away from it pretty quickly. At that point, I’d make 16 a profit target, and would get out half at 16, and the rest if it failed. Unfortunately, on this trade, it never recovered to 16, and I would have been stopped out for about 1.3R.
Trade 3: GG
I was only looking long today, since options expiration causes a choppiness that, I think, makes shorting stocks harder. Plus, the major indices were drifting down, but still in positive territory due to their opening gap. Had I been looking short, I would have enjoyed good success on Goldcorp Inc. (NYSE: GG). It’s likely I would have taken the first entry (marked with blue arrow), and then jumped out on the strength that followed. However, I note that it would not have hit my stop. Then, when it pushed significantly below that failed attempt, I would have entered short again.
The series of red lines shows how I’d like to move my stop. After each significant move, I’d like to move my stop so that it can retrace half the move, but not more. (On trendier days, the ultimate trader can sometimes stomach allowing a 2/3 retracement of big moves… but on choppy days he likes his profits too much). I’d handle round number 28 a little differently, and give it extra room to stick to 28 for a while before moving my stop below it. In this case, that gives up a bit of profit, since it eventually recovered above 28. But, the ultimate trader cares not about these issues… on a better day it would have found resistance at 28 and fallen away from it for good. Still, the original trade would have made about 3R had I not jumped out. The second trade would have made just under 3R.
Not a bad day for the ultimate trader. Not a bad day for plain old me, either… just not as profitable. :-)
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| NVDA |  |  |  |
| XMSR | | | |
| GG | | | |