Monday, April 28, 2014

Rethinking Stops: epilogue

I was frustrated about getting stopped out of BAC and YNDX on interlay moves, which recovered.  Although the positions recovered in the short term,  both would have gotten hit very hard had I not closed out the positions:

YNDX:

BAC:


Monday, April 21, 2014

Stops-- an actual example of HFT slayings

Rethinking stops has caused me not to leave stops.  Here we have CORN selling off 10% hitting a low of 31.08.  People on message boards, twitter, stock twits have complained heir stops got hit some at substantial losses.  This 10% move lasted  mere seconds but it wiped out numerous stops. 



This appears to be the same type of algorithmic trading that caused the flash crash  due to HFT.   I'm convinced that especially in thinly traded markets stop orders should not be entered.  The approach of using stops only if closing below the price it likely the approach I will take from now on.

Sunday, April 20, 2014

Rethinking Stops




Some type of stop is necessary to prevent significant portfolio risk.  They have they their downside in that they are frequently sought out and you can get your pocket picked on an interlay move.  I had two recent stocks where my stops get triggered.  I had considered these types of situations a necessary evil to protect against more substantial risks.

I've since read a a few books and blogs by experienced investors and traders.  David Dreman, a famous contrarian suggests not using them at all.  He points to examples of the flash crash.   Dreman  would sell when his fundamental criteria was realized or if the fundamentals worsen.  John Boorman, a trend trader, suggests stops based only on daily closes.  In other words, an inter-day move would not trigger a stop (in which case I would still be in YNDX) with a nice profit), but a close below the stop would cause him to sell on the open the next day.

The risk in the Boorman approach is that slippage would be greater.  To compensate for the slippage risk, I would probably have to take smaller positions.

I need to perform some more research before adopting a new approach, but I have seen enough already that the research  should will be valuable to my bottom line.

Wednesday, April 16, 2014

NBG closed

NBG got hammered on news that it was having a secondary.  My long play was the Jan. 16  calls with a 10 strike against the Jan  16, 5.5c short calls.  In other words, sell the 5.5 to pay for 3 10 calls (plus a credit).  The dilution makes it less likely that a move to 10 is likely.


Although my original theory was wrong and had I taken a stock trade I would have been run over, I made some money on the spread.  This a reason why I like ratio spread -- you can be very wrong and make money.  If you are very right you make a lot of money... as long as your not just kind of right.

Monday, April 14, 2014

YNDX Stopped out

Stopped out.   My stop was too tight as a result of position size. Had I taken smaller shares and a wider stop, I would still be in this trade as YNDX rallied from my stop.

Entry: 28.29
Exit 27.31
-.98
 -3.4 %

https://www.tradingview.com/e/?symbol=YNDX

Sunday, April 13, 2014

Closed BAC

I bought BAC on 2/8/13 @ 11.85, The financial sector had shown strength after being decimated.  I bought within a consolidation period.


 I used the 30 Weekly Moving average as my stop.  After an initial move being able to monitor to switch my monitoring of BAC from a daily perspective to a weekly perspective enabled me to catch a very nice move. It would have been nice to stay in this position longer as it had picked up some pace to the upside over the past month (reaching a high of 18), but rules are rules and we have a red impulse bar that breached the 30 MA.


The position was closed on 4/11/14 at 15.72  +3.87 (.04 dividends)  32.65% gain (long term capital gain).

CLOSED: MOS

MOS is one of those trades that show nice potential at points but never quite get it done.  I was looking for a reversal play and it seemed to have all the elements that I look for -- a vicious down move followed by a long side ways period.

Entered 1/10/14 @ $46.64 -- Nothing special about the entry after recovering from Dec's dip MOS recovered and traded sideways.

Exit 4/11/14 @ 47.73 (+.25 dividend) With the dividend a 2.87% return.


Recap: I looked for a longer term play but there were a multiple opportunities to make a bigger profit. I had a big move within 3 days after buying.   I had a small position and a wide stop so  I could play a big move. In retrospect the doji should have been a sign to take profits on 1/2 the position.   I would not be surprised to see Mos  head to $44 based on the state of the market.  At that time it may be worth getting in again if there is a long legged reversal like was seen in January.

My decision to take profits was based less on what was happening in MOS than in the market overall.  I wanted to reduce exposure to the market and take a profit before it went red.

Saturday, April 12, 2014

New Position- YNDX

With market selloffs come opportunities. I purchased YNDX (Russian Google)  after it made a new low but then reversed.  It has been in a sideways pattern after getting hammered due to the Russian Crimea Situation.  I think there is a chance that the / a bottom is in.  The MACD is showing divergence as the sell off has continued.  YNDX has also  held up relatively well compared to the broad markets that have sold off pretty heavy.  That being said  YNDX  has been trending downward so I'm keeping a tight stop set at the bottom of the daily reversal.  


Friday, April 11, 2014

Market Sell off continues. Profit taking.

As I expected, the relief rally failed.


Both of my recent shorts, P and KNDI hit my profit targets and I closed both positions. On KNDI my Target was 12.  Half the position was covered at 11.88.  The second half  remainder was covered at 12.70 after the 9EMA was touched-- it was my stop following the move down and it tracked very well. But if I used a 10 EMA I would still be in.   This one is probably headed lower


P, Took out a very nice profit in one day.  There was more down side left but ... I suppose I was too quick on the trigger.  But after +2.22 move the profit was too good to pass up.  No regrets.


Wednesday, April 9, 2014

New Positions -- Short P, KNDI

Based on my belief that the market is in the midst of short term relief rally, my plan was to initiate some short positions as the market bounces.  I took two additional positions.

Pandora $P, Short 28.87  --- Heavy down that appears to sill have some momentum, a bounce on support at 26 followed by two bullish days rallied to the 9 ema which has tracked the down move pretty well.  Initial Target 26.  Stop at 31,  risking about 1%


KNDI  Short 14.04-- Showed very poor relative strength .04 and the MACD is picking up downside momentum.  Stop 15.90 --high from three days ago.  Risk 1.25% 




April 9, 2014, Bounce continues

Two days ago I suggested that  a reversal of selling was likely .  I bought some FB and GTAT for quick trades.  The bounce has continued.  Through today and picked up some momentum after Fed Minutes.  Nasdaq was + 70.91


I'm not convinced that this bounce is anything more than a relief rally.  Breadth indicators like the hi/low  are not showing board participation.  I am using the bounce to initiate some short positions.











Tuesday, April 8, 2014

GTAT

This is a stock that I know and have done well with on the past. GTAT has had a very nice run but is now in a consolidation phase.



I bought yesterday @ 16.54 and sold pre-market at 16.91. I realized that I didn't really have a plan for the trade as I was perhaps caught up in the impulse of seeing the market going up and wanted to grab part of it. GTAT had been a momentum play but as the chart shows is going sideways and the MACD is negative. Since I've noticed that GTAT gaps up, often to its daily highs, I decided to get out of the trade. In total, I made a profit of $148.  

In some aspects this was a bad trade as was reactionary and I didn't really have a profit target as it was not planned. I did have a stop under yesterday's lows.  But I also think it shows I've gotten better as a trader by recognizing my mistake and getting out, with a small profit no less. Years ago I would have probably let it ride to see what would happen.


Monday, April 7, 2014

LULU closed



I bought this bought this because it had a nice divergence on the MACD, when it failed to go lower-- higher lows and it got a good move after earnings.  I was targeting a close of the gap to 57.25  But the overall markets started to sell pretty hard and although LULU held well for two days into the sell, on the third day it gave back over $2.50.  I had  hoped that it would  catch a bid given its relative strength and doubled my position with a tight stop. In hindsight,  I should have waited for the broad market to wage a come back or I could have held my first position longer and looked to take partial profits at the 55 mark.

But no real regrets for this trade given the choppiness of the market. Closed the position out for $163.  Nothing to brag about but it could have turned into a loss.

Playing Defense

The market has pulled off a couple of big down days in a row. Until recently, my positions have weathered the storm pretty well.   I'm still sitting on big profits. My stops should prevent a shark bite -- a single loss greater than 2% of portfolio.  As I see it, my biggest risk is having the market take out a number of my stops in short period.

The nasdaq shows 3 big day down days. But it was encouraging that it rallied about 29 points after hitting the lows on the day.  I caught a bit of the move day trading FB for +.60 move.  I don't like to day trade but when the move stalled I figured it was better to get out than to wait to see if the move continued tomorrow as FB was beat up pretty badly over the last week.




Given the choppiness, I've reduced my HCLP position by 1/3 and my RFMD  position by 1/2.   I completely closed LULU after my attempt to buy down was taken out.  There was a reversal towards the end of the day and the position would have worked out better.  But in choppy markets it is more prudent to take profits faster.










Friday, April 4, 2014

XCO

Bought
XCO @5.87, on on the break above a 5 month base.  Followed by two days of spinning type dojis, That breached the 6 level.  Not unusual given the overhead.  The MACD still looks pretty good.    





Initial Target 6.75 level. Against stop of 5.45.  For 2 to 1 initial Ratio for a .5% risk.  I feel the market is too choppy to go bigger at this point.  Look to move the stop up if hits   6.20 the stop will be moved up.