Tuesday, November 07, 2006

Trade of the Day - Akamai Technologies Inc. NASDAQ (AKAM)

AKAM was a momentum play on the Xbox announcement. I noticed it was gapping up in pre-market and that resistance from the daily timeframe was in the area of $50.00. So I decided to play it on a break of the pre-market high. Given yesterday's big move and my target price, I didn't want to wait for a low risk entry.

After hearing the weak earnings reports from home builders this morning on CNBC, I had a pretty good idea that my technical long setup on EXP would not play out as planned. It opened lower and then rallied up on weak volume, carving out a lower high from yesterday's late afternoon high. I drew in a trendline to see if things would pop as price approached support. As price fell through the trendline, I decided to short EXP. I covered into the close.

For now, it looks like the stock will continue lower and maybe fill its earnings gap before coming back into play as a long.


Zoomie said...

I was wondering how you control your risk, or set your stop on breakout trades. It seems at times there aren't any clear candles to use to set your stop. Do you use candles on a shorter tinmeframe? Thanks for sharing your trades. Great Blog!!

Jamie said...

Hi Zoomie,

When trading momentum stocks on the open, I usually look for stocks trading in a fairly NR in pre-market and, as a general rule, I set my stop below the pre-market low. It's easy to get shaken out on the open because there's a lot of volatility in the first 10 minutes. I alternate between the 5, 10 and 15 minute timeframes. If the first 15 minute bar closes wide in my favor, I like to move 50% of my stop to break-even. After the second 15 bar, I start trailing a full stop pennies under the preceding bar until price approaches my target. Volume is key on the open, so if I don't feel it, I bail out fast.

BTW, I enjoy reading your gapper day trades on move the markets. Nice work!