As we discuss stocks that consolidate, when taking a position, ask yourself these three questions to properly manage the trade.
- 1. Where am I wrong in this trade? – Define the price that objectively says you are on the wrong side of the trade.
- 2. Where am I right in this trade? – Define what price needs to be hit in order to suggest that the stock is in play.
- 3. Where is the stock headed? – Define your target price, so that if the stock is in limbo, you can take a seat, eat a sandwich, and patiently let the trade pan out.
Here’s a chart of BYD. The name of the company is irrelevant, we are just using price as an example. See if you can answer these three questions and we’ll open up for discussion.
OA
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Good questions…good lesson. Far too many people enter trades without any idea what their plan is after entering the initial trade. And then that’s when they start asking you what are you doing OA? lol
Wrong under 11.60.
Nice, I prefer closing prices too BTW
looks right if we close right here
I think a lil higher. Above $12.50 for sure.
Wrong, if after an initial move up I don’t protect some profits on a pullback. I’ve ridden too many up only to hold it all the way back down. There’s also the point you alluded to about a stock being in limbo. If it isn’t making a move within a certain timeframe, (and I’m in an option), it could be time to cut it loose rather than experiencing time decay. This, of course, would depend on which option I’m in…how far out, etc…
Don’t you find that when you try to predict these things, you are wrong most of the time? General question, not picking on you specifically.
I’m not following your question about predicting these things. What do you mean? I’m in favor of letting trades pan out, specifically on a “good” setup. But if time goes on without a move, then I’m happy to cut loose and look elsewhere.
On BYD I am wrong below $11.27 and right above $12.58. I saw your comment on closing prices…oops, I bailed early on YOKU calls then because I thought I was wrong if it took out Friday’s low. Maybe should have waited but it was a small loss.
Then you ought to rethink trading breakouts. Why anticipate the breakout, hold, then sell on the retest? Rather, anticipate and sell into strength. If you want to get back in, buy the retest. Don’t sell the retest. That defeats the purpose of trying to make money.
Point taken…thanks for the response.
for a triangle you wait for the break, and then trade the kissback. if it breaks north, you wait out the retrace, if it breaks down you short the kiss of the trendline from underneath.
Perfect.
At 12.26 you’re better off shorting as your defined risk is a few cents above. You could leave some wiggle room for a false break out though. Going long at 12.26 means you’re at risk for taking more heat before being proved wrong. Back when volume used to be real and not bot fighting, that last up candle being on really low volume would probably have me looking to short instead of going long.
For WLT then we should be good to mid 17s. Possibly 18. Correct?
Have you seen the volume profile?
Big pocket till 16.20 – 16.30, then speed bump (scale out and keep on radar). After 19.00 it could go lunar. Am I following correctly?
Yep, so short dated options will be best to book in the 16s.
OA – question for you – would you be leaving a limit order out hanging for this – or any trade – or just leaving a watch list notification ping for it.
Entry on this above 12.50. I know this stock, so the shorts are well hemmed in.
I would keep a 2 day’s prior LOD as a running stop for a swing and out at 13-13.50 for the double top, or go past 14 for the new breakout play.
Sorry for my retarded answer in the other thread, the stock was indeed up 4%. What I was trying to get at was the IV was relatively stagnant given the 4% move. I would say stop at 11.50, right would be a break around 12.50ish and the stock would gap to 13.50 given the price history and volume.
It’s gotta move beyond the strike. Be patient, it will happen.
1.) Hasn’t left consolidation going long could be too early.
2.) chart is lower left upper right, and price is holding previous resistance.
3.) higher, first target 14 because nearest new high
*nearest higher high.
The OA continues to hit it outta the park
ZHNE FTNT FSLR MCP RSH NTE KBH
what did I forget & what’s next!? 😉
RKUS 🙂