I bought AAPL on a break of yesterday's resistance. I sold 50% on the first signs of weakness and I was stopped out on the balance. Only a couple of trades today. Because of the general market malaise, good setups were hard to find. Friday afternoon doldrums sums it up pretty well.
Friday, April 28, 2006
Trade of the Day - AAPL
I bought AAPL on a break of yesterday's resistance. I sold 50% on the first signs of weakness and I was stopped out on the balance. Only a couple of trades today. Because of the general market malaise, good setups were hard to find. Friday afternoon doldrums sums it up pretty well.
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6 comments:
Nice call, Jamie. Two questions: Do you have a pre-determined price target on each trade or is it a matter of seeing where the trade takes you? In the case of SYMC, I assume you moved your stop up after the stock went your way initially. Any "rules" in this regard or is it a matter of saying, "If the stock goes in my favor by at least $.25, I will raise my stop to my entry price?" Thanks.
Have a great weekend.
Hi Chris,
I don't always have a target, but I know where the resistance levels are and I expect price to consolidate at the resistance levels. For AAPL, I had a target between $71 and $72 because there is a well defined inverse H&S pattern forming on the daily chart. For SYMC I saw resistance at $17 and $17.50. After the first 15 min. bar, I had a pretty good idea that SYMC was going to fail, because of the long upper shadow. It consolidated for a bit and started to make its way up very slowly, but by 10:15, I was only up about 10 cents and decided to move my stop to break-even, because I felt I was wasting time nursing a stock with minimal potential.
Both of these entries were a break of yesterday's resitance highs. In order for these types of trades to be successful, you need a lot of volume in the first 30 - 45 minutes of trade in order to propel price higher. SYMC's volume was not sustained after the first 15 min. bar which was a key factor in its failure.
For setting stops, I usually set my stop pennies under the previous 15 min. bar as a rule of thumb. However, some 15 min. bars are very wide and in these cases, I generally set the stop about half way down the previous bar. As price moves closer to the target or resistance, I switch over to the 5 min. time frame and manage the stop on 50 % of my position very tightly.
One of my criteria for a well executed trade is that you'll be in the money within a very short time frame 5-10 minutes. If you have to micro manage a trade because it is not moving as planned, then it becomes an opportunity cost because you may be missing out on better setups elsewhere. That's how I felt about the SYMC trade this morning.
Also, generally speaking, cheap stocks (under $20.00) don't perform as well as more expensive stocks.
Great weekend to you too!
Hi Jamie, question on stop placement for you.
Regarding plays on a break of yesterday's high, where do you place your stop if the stock opens above yesterday's high? For example, let's say that XYZ gaps up to 30.50, exceeding yesterday's high of 30.4 and you get filled on a buy stop order at, say, 30.53 at 9.30/9.31 AM.
Will you have to resort to some kind of percentage stop or will you try and find an obvious support area from the previous day? What if there is no obvious support area from previous day?
This is a great blog, one of the best.
Regards
Hi president fox,
Thanks for the kind words.
Usually, just after the initial breakout, there can be some volatile price movement so its best to give price a little breathing room. If there is no obvious support area, use the 50 period MA as your support guide until the breakout is well underway. After 20-30 minutes you can move your stop up to just under the 10 period EMA on either the 5, 10, 15 minute time frame. If you are managing the trade with a shorter timeframe such as the 5, 3 or 1 minute chart, it's best to use the 20 period EMA as your guide for adjusting stops after the initial break has been determined to be successful.
If the stock traded in a fairly narrow range in the afternoon prior to the breakout, you can use the low of that trading range as your stop.
Thanks for reply Jamie,
Like yourself, I tend to use either the previous bar/underneath 10 or 20 ema for stop placement. I traditionally avoid the open, but have been rethinking that position recently, hence the question on stop placement directly after open (where I place my stop determines the amount I stake, so the stop has to be determined in advance).
Have a good one
You' re welcome PF. When trading the open, I have to have a good strategy, otherwise I often get taken out. The open is very volatile and provides me with some of my biggest profits, however, it is much riskier.
Good trading!
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