Shared by
ckz8780
LOSS
- Setup: -------------------------------------------------------------------- Daily Range Break
- Entry: --------------------------------------------------------------------- $1.87
- Shares: ------------------------------------------------------------------- 500
- Stop: ---------------------------------------------------------------------- $1.80
- T1: ------------------------------------------------------------------------- $2.01
- T2: ------------------------------------------------------------------------- $2.10
- Reward:Risk Ratio (T1): -------------------------------------------- 2:1
- Exit: ----------------------------------------------------------------------- $1.87
Profit/(Loss) With Commission: -------------------------------- ($14.56)
Details:
Bought in anticipation of the break of $1.90 on the daily. There was a lot of airspace above it an volume had expanded nicely the day before. This was nothing more than a failed breakout. It was strong but not strong enough. The stock pulled back after hitting $1.97 and I stopped out flat for the cost of commission + an ECN fee. The ideal spot to buy this would have been the day before on the break of $1.50. The stock gapped up then pulled back to $1.53 and stayed there for about ten minutes before breaking at 9:50am and running to $1.75 in around 90 minutes.
Execution detail:
| Date/time | Symbol | Side | Price | Position |
|---|---|---|---|---|
| 2012-04-24 09:31:42 | KERX | buy | $1.870 | long |
| 2012-04-24 09:48:49 | KERX | sell | $1.870 | 0 |
Comments
kunal00
yo u didnt have a setup in this did you? looks like you just hit the buy order at the open which is not how we do things. buying the first candle on the 5min at the open is ough pickings..
ckz8780
Kunal - My setup was just a range break - it's tough to see here cause the chart is so small but the high of the candle at the beginning of the gap was $1.90. There was no intraday setup because it was too early, I just saw the heavy volume on the first candle and it took out the break spot ($1.90). I was hoping for a partial gap fill but it didn't hold which was why I sold flat a few min later. You're right it is tough to buy the first candle on the 5 min chart - if anything I probably should have been using a 1 or 2 min chart so I could see if there actually was a setup. Since this trade I have restricted myself from playing the first few candles so that I can develop a hot setup on the intraday before I buy!
rittrader - some good points - the only thing I don't really agree with is that going long was not a high probability setup due to it being below its major moving averages. Actually, I suspected that since the stock was extremely oversold it was somewhat likely that it would crack back TOWARD the moving averages (since after all, they are averages). In retrospect you are both correct, there are stronger setups out there. This one actually did today (5/14/12) what I expected it to do a few weeks ago: broke above the $2 mark and quickly ran to $2.25+ - check out a daily chart now and you'll see what I was going for with this setup! I just don't think it was ready yet :)
Thank you both for your comments, any and all advice/input is very much appreciated and I am considering all your points carefully!
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I’m not going to go to deep into the technicals of this trade because this was in my opinion a mistake. Not because of the loss but the lack of thought. This stock was trading way below the 50/200 DMA prior to the 24th also going long was not a high probability setup after the massive gap-down at the beginning of the month. The trend continued lower which indicates to me that you again went against the odds, perhaps chasing the turning point. You want to ride the momentum not chase turning points otherwise you get burned time and again. Next, you entered the trade @ $1.87 which had a daily ATR of about $.27 the previous day and it opened at about $1.50 so you already missed about 80% of the move. Now, according to your 5M chart I see a “hammer” @ $1.95 and that indicates that VOL has dried-up and as such you could have "flipped" this for a small gain. While your return of 17% was good, risking a 5-round lot is not correct sizing. Pyramiding works best with high probability setups and halving as the trade works in your favor (i.e. 5, 2.5, and then 1.2 lots). For a trade like this a single round lot is suitable otherwise add lots as the odds favor your success or your trade becomes more profitable. My advice is in the future look for better setups or paper trade ones like this. I've also e-mailed you my daily KERX chart that I annotated for you.