Shared by
ckz8780
Intraday short breakdown. This market seems to not be very conducive to shorting anymore. Since this stock was sort of thin and had a wide spread I gave it a bigger range to play in (up to $53.50) but I should not have taken it so big. I got headfaked by the volume on the dip so I did in fact wait for confirmation of the crack of lows but it was BS, and popped right back up. I thought it might fail at $53 which it started to but somehow I managed to pick the absolute bottom in the market on this one as SPY ripped from 140.87 to over 142 immediately after I shorted this. I definitely let it come back too far but my original stop ($52.85) just seemed too tight for a $50 stock and at that point it hadn't really violated the pattern so I decided to see if it would roll over. Unfortunately the market propped it up. Lastly the bear flag on this while it was clean was very far away from the moving average (by almost $1) so I had like $200 in risk just for it to re-test the moving average. I should have waited until it retested which is my normal rule, and also taken a smaller position since the market was strong. Lost a painful $242.00.
Execution detail:
| Date/time | Symbol | Side | Price | Position |
|---|---|---|---|---|
| 2012-12-05 10:46:17 | RGR | sell | $52.250 | short |
| 2012-12-05 10:46:17 | RGR | sell | $52.250 | short |
| 2012-12-05 11:53:12 | RGR | buy | $53.460 | 0 |
Comments
gregr
Just for grins you should take a look at your performance overall in these cases. I loved trading setups like this, and I thought I was good at it, but it turns out it generally didn't work well for me overall. Here's a chart from my own trading, showing just short trades relative to their opening gap -
Now all that said, I still like to trade them, but I'm a little more conscious about it now. :-)
ckz8780
Derek: Actually $52.85 was the stop I used based on my risk tolerance. Based on the CHART, you can see the last breakdown was $53.50, plus the 20sma was around 53.50 at the time which is why I decided to let it re-test. At $52.85 the chart hadn't really busted the pattern so I wanted to confirm the pattern was actually busted before I got out. If the moving average had been sitting right on top of that bear flag you'd be 100% correct but for this particular pattern it was way up. That's actually why I don't like this pattern as much as something like this where the moving average is sitting RIGHT above the high of the base: https://www.tradervue.com/trades/304242
gregr: I have run stats on this setup and on average over 6 months I actually have about a 63% hit rate on it. That's pretty high considering most traders average about 35-40% overall. This setup had something wrong with it based on my criteria for the setup (it was too far from the moving average), so I should not have been in it so large, if at all. Overall these "secondary breakdowns" after a big morning flush work pretty well but they require a bounce for relief before they are ready to short. I didn't wait for a bounce here, shorted before relief, and guess what...it bounced! Lol
Thanks for the feedback guys, I really appreciate it!!!
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52.85 would have been a perfect stop here as you said. I find with these intraday breakdowns you want to see the setup start working almost right away because the psychology is that all of the intraday buyers have been flushed out under the LOD and it should find the next daily support level or whole number. If it doesnt start flushing right away and you start to see that original level become support like this you should probably just stop out in my mind.
Also, I dont think it is fair to judge a stocks stop price by the fact that it is a high price stock. Just because it is a 50 stock doesn mean you need to give it more room. You can play 10 stocks that are moving 2 dollars intraday and you can play 100 stocks that are moving 30 cents intraday. So maybe next time just judge the stop by the chart like you did with you original stop.. Just a couple thoughts!