Monday, November 20, 2006

Dummy Trade of the Day - Marvell Technology Group Ltd. (Public, NASDAQ:MRVL)

Both of these gapper trade setups came from my gapper scan. MRVL gapped up and formed a NR body with a short upper and long lower shadow. The second stick was almost a bullish engulfing bar. The third stick rallied into resistance and pulled back slightly. I decided to long a break of the third bar high as I didn't feel that MRVL was going to consolidate and I was willing to risk 25 cents. I booked a 50% profit on weakness midday and held the balance into the close. When MRVL breached it rising 10 period MA in the afternoon, I was getting ready to sell. However, it immediately regained it on the next bar, so I decided to hang on.

KNOT had a bearish opening bar with a long upper shadow. It spent the better part of the morning consolidating sideways with small, tight candlesticks. Shortly after 11:00, it carved out an NR7 stick on extremely low volume. The next bar ticked up on higher volume and that was my cue to get long. The rising 10 period MA was just underfoot and added to my confidence in the entry. I took my exit on the anticipation of a hanging man reversal.


5 comments:

Anonymous said...

Hi Jamie

nice collection of trades and great analysis.

Quick questions. Do you use Level 2 at all for your entries? What sort of orders do you use?
Do you have any rules about the max spread of a stock or would you buy on the bid etc?

Cheers

Jamie said...

Hi Anonymous,

Thanks, I use level 2 for market depth on these types of trades when I'm trading from home. Unfortunately, I've been using a Web Trader lately so it's a bit of a handicap.

I use limit orders. I prefer a very tight spread max 2-3 cents. However, if I think a stock has real potential, I will trade the bigger spread and try to get out on strength. Selling on a stop loss with a big spread will take away a good portion of the profit.

Good Trading!

Misadventures said...

I too had fun with MRVL. Jamie...How does a wall street warrior exit trades on profitable position. I'm struggling with this concept as I have no system to take profits. I do it on feel and feel has consistently left big money on the table.

Thanks,
LP

Jamie said...

Hey LP,
I checked out your blog and I like it a lot. You're doing great. Exits are tougher than entries. You can have all sorts of rules for exits, but in the end its all about preserving profits.

If a trade is moving slowly at a 45 degree angle, I try to stay in as long as the 10 period MA is not breached on a closing basis. If a trade moves quickly with WRBs at a an 80 degree angle, I have no qualms about taking a profit (partial or full) when it stops to consolidate especially when the 10 period ema is far away from price.

I also look for candlestick reversal patterns such as high upper shadows and hanging men as indications that price is going to pullback.

Also, the market and sector are important in deciding whether or not my positions have more potential.

Misadventures said...

Jamie,

Thanks for the tips. I think I'd like to interview as many of the good bloggers out there and ask them this question? I think I would like to structure it a bit more so that I don't waste their time by leaving it open ended. I would then like to post it up so that we can all share in the thought process. Having said that, I will take some time during the Turkey week and think of a way to structure my own exit rules. I absolutely need a bit more structure as "feel" is not quite good enough. I paid the price today once again.

Thanks,
LP