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Monday, December 26, 2016

Trade Recap 12/23/16

Somehow Friday was the best day of the week by far for me and actually a solid green day. But the reason why it was a good day is not a mystery to me, I believe. The reason I did well was because I only took the setups that I was very confident in and focused on my strengths - which I believe I am starting to realize and take seriously is just taking certain patterns I have seen time and time again that work well that have a high probability of working. Going forward I will try and do a lot more of just reacting instead of predicting where to get in and when. The chart, by having some sort of pattern I recognize as high probability in the right scenario, will provide me with the right info.

CTAS: I wasn't sure which way this stock would go. I thought the earnings were meh, especially with their margins going down 10%. So I had a short bias and saw from prior earnings dates that it does have nice range on earnings days and usually picks a direction for the day. At the open it started to flush lower and I thought about shorting a whole number breakdown but I said no more level 2 bullshit and that ended up being a good call as it wicked up and down in the first few minutes. Eventually, it held under vwap and consolidated. I wasn't really sure about shorting this although it was worth a shot I suppose. It wasn't really anything I liked and ideally I wanted a push higher to 119 where there was a lot of resistance but it didn't get there. It started to come off from vwap and go a bit lower but I didn't see a setup yet. The only thing was possibly when it was at vwap but I didn't have enough conviction in the earnings to go for it here. Using the 5min candles though I did see somewhat of a decent pattern so I got in and it started going in my direction. I was hesitant to go in because the prior candle had big washout volume but I figured the pattern was good and of course it can go lower despite the volume. It was going well but it made a new low by a penny and started coming back up so I moved my stop up in case that move was it. It got me out for a slight profit but then came back off and made a new low. Of course as I have said before that the new penny lows don't have to be it but I wanted to make sure to lock it in, in case. It did end up going a bit lower and that ended up being the bottom and it started rebounding and then headed higher the rest of the day for the most part. The washout volume signaled the selling was reaching capitulation and thus even though it went lower afterwards, it wasn't by a lot and that ended up being the low. Looking back, the 3 + 5 min candles offered a nice setup that I should have seen at the time when it was at vwap and the real move happened. Also, a friend shorted it on the rebound but I had a feeling it wouldn't have worked because it looked like a reclaim of support setup but I didn't take it long because it wasn't the cleanest and I was still overall bearish on it but it did end up going higher and rebounding. Lessons: Use the 3+5 min candles even at the open for your sort of setups.

LMT: I had this on watch after the Trump tweet and figured it would do a similar thing like last time, which is rebound back to r/g. I had it on watch for it to potentially go and washout below the premarket low and then rebound. It popped at the open and then faded off. It had decent selling volume on the 3 + 5 min charts. I still was looking for it to washout a bit more but it never did. It stopped at $247. I was looking at a record of the tape at that time and I couldn't see anything that would signal to me that, that was the bottom other than the volume which piqued my interest. A couple of minutes later it sprayed down to the $247 level again as well and was quickly bought back up so that was a potential sign there but I didn't really focus on it too much. This ended up being the lows for the day. Looking back at the 3min, it did offer a nice pattern with a potential tight risk and it ended up working well from there. Where I eventually did get in was on a nice pattern breakout on the 3 + 5 min charts and I rode that up and then added when it setup again with a consolidation. I had an offer at r/g but it never got there. Instead, I figured that this was either going straight up into r/g or it was just going to peter off at some point so I kept raising my stop and eventually I got hit. This ended up being near the top which was nice of course. I was out at the time but it did offer a nice fade to vwap with lower high pattern as well. Lesson: Keep the 3+5min charts on at all times. Wait for the stock to tell you what it wants to do.

TWLO: This was my only slight loser at EOD for me. Normally I wouldn't have done anything at this time due to the volume but I have seen TWLO trade and it has really nice patterns and fades at times. The stock was sold off after the news about the AMZN partnership so I thought it was overall a weak stock. I didn't really have it on my radar until I was looking through charts at EOD. It had a very nice setup for a fade so I shorted it thinking maybe we get some EOD selling. It went lower and touched r/g so I put my stop at b/e thinking if it was going to go then it would just keep fading but it just got bought back up on volume and stopped me out for flat. This should have been a warning sign that it wasn't going to work and with the low volume pre-holiday day being almost done it was tough to short anything with no sellers I guess. When it started coming back off again I tried it again but it just stopped going down and then started reversing and I had a tight stop so I got taken out and that was it. It ended up reclaiming support and just went higher. I don't regret taking the trade, it definitely looked good. It was sort of a do or die moment for it so a breakeven stop once it starts working is appropriate. The only thing to note is my psychology during this trade. I was very outcome dependent during this trade. I didn't want to give back any gains from the day before since I had a rough past couple of days earlier in the week. It came down to having bigger size than I really accepted the risk for. I wanted to risk X but had 2X the risk. Part of it is because as I said before TWLO had such fades before with really nice patterns so when I saw one I wanted to capitalize on it. That part is ok but if that is the case then I have to accept the risk and know that, that money is already gone from my account. Be content with the outcome no matter what. No expectations.

Other stocks:

PTLA: Didn't trade this at all but wanted to note how of course with big volume, things can still go higher or lower. I avoided taking a breakout trade because it had big volume going into it making me think the buying power was waning. I don't think it is a big deal to not have taken the trade. I think I would have been more disappointed in myself if I got greedy thinking I would hit it big on this trade and it not working than not taking it for legit concerns about it. Process > outcome so despite it working and the stock went higher, I think my analysis at the time and my thoughts about were in legitimate.

Things to remember:
1. Volume exhaustion on either side can be accompanied by continued price action for a bit more in that direction before it reversed.
2. Use 3 +5 min candles as they look different to you and thus provide different patterns and opportunities. That may be your edge and strength - being a highly visual person.
3. I have to accept the risk and know that, that money is already gone from my account. Be content with the outcome no matter what. No expectations.

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