Here's another dummy entry I took today. HANS gapped up and retraced 25% of the move from Friday's low to the ORH. It setup a low risk long below the ORH and broke the ORH decisively on the 6th bar. After the break it came back in for a retest but failed. I exited the trade immediately. No point in staying in a trade that can't hold the ORH after such a decisive break. The trade was profitable despite the failure, however, it could have easily turned into a scratch or a small loss if I had not applied my trading rule.Monday, April 23, 2007
One That Didn't Work - Hansen Natural Corp. (Public, NASDAQ:HANS)
Here's another dummy entry I took today. HANS gapped up and retraced 25% of the move from Friday's low to the ORH. It setup a low risk long below the ORH and broke the ORH decisively on the 6th bar. After the break it came back in for a retest but failed. I exited the trade immediately. No point in staying in a trade that can't hold the ORH after such a decisive break. The trade was profitable despite the failure, however, it could have easily turned into a scratch or a small loss if I had not applied my trading rule.
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9 comments:
Hi Jamie,
Did you close when the 8th bar breached the OR high? If so, any reason why you didn't wait for it to do so on a closing basis (9th bar) before exiting? Thanks
Zen
Hi Zen,
From experience I noticed that highly liquid NASDAQ stocks usually observe support on a retest after a breakout within a couple of pennies. Because I had several trades going at the same time, I had to be strict with my stops, HANS was stopped out on a 6 cent breach of the OR high at $40.19.
A retest of a breakout is different than just regular support and resistance in a given range. I don't like to give these retests much wiggle room because inevitably they fail 9 times out of 10 and I end up with a scratch.
Also, failures usually result in faster moves lower than HANS.
Zen,
As an example, notice how AAPL observed the ORH to the penny on the retest.
Hi Jamie:
Hope you're well. Quick Q: How much of yr capital do you put in each trade? From what I've noticed, you sort of "scalp" 40-80 cents out of a majority of your trades, hence you'd be probably be trading with good size and tight stops to be profitable - taxes and commissions?
Is the trading rule you refered to a trailing stop at the previous low?
Hi Yaser,
I'm well, thanks. Hope you are too.
There are many factors to consider when position sizing, but on average I would say about 10% capital but the risk is generally small due to pre-planned stops and mainly low risk entries. I usually reduce my size under choppy or extremely volatile market conditions.
Commissions are not a big factor really, only half a penny per share. Taxes are always too high in Canada and especially in Quebec.
KC,
The trading rule, I was refering to is a failure to hold the breakout point on the retest. Read my earlier comments in response to Zen.
Hi Jamie,
Thanks, now I understand why you are strict with retest. In other words, you up your stop to 5-6 cent just below the OR high for such cases?
Zen
Hi Zen,
Exactly, look at my CDWC chart today for a good example of how quickly a failed retest can breakdown.
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