I went for a home run in Fuel. I swung for the fences and struck out. Here's my post mortem review of the trade.
I suppose everyone has done it at least once. You get a little too confident and you decide to go big, really big. I come across FUEL when it looks like this:
I see an extended base with a breakout on very high volume. I liked seeing the down day with a decent tail as I figured that would mitigate the selling pressure. If it could retake the close on the breakout day. I figured this was a go. The numbers looked good enough to make it happen and go for the gap at 25. So I planned to enter on the trade if it retook 19 with a buy stop.
I believed that the 60% plus revenue growth along with positive guidance during the CC that social media would be the next big revenue driver could make this an EP type move. I became even more confident in my analysis of the trade when I see Jesse Stine post the following chart:
So with that in mind, I planned on going into this trade in a big way--80% of my equity big. My YTD profits were up over 60% which I reasoned gave me the room to take this shot. If my initial profit target is acheived I'd be up over 100%.
I felt (like Jesse Stine) that there was a well defined risk here. I reasoned that the top of the consolidation was where it was likely to stop if the ret-racement 17.50 . Since I did not view this as a swing trade, I was prepared to let it come in and make that test. I also figured that my stop should be at the point where I'm clearly proven wrong. So I set that at 17.05 figuring that will at least get me out above 17.00 if its hit.
In sum, as I planned this trade I went in prepared to lose nearly 9% of my portfolio to make 25% or more if this trade worked. (Yea, I know my risk rule is 2%. ) I did this trade because (1) I have big gains this year, and the number of trades I have made this year is wearing on me. I've built my gains this year by hitting singles and doubles, but I haven't let trades develop that would have go on to be massive winners. I bought AGIO at 65 (now in the 95s) and BABA at 88 last month (hit a high of 120). I could go on but, the frequency I was trading wore on me. For that reason, putting on a position trade appealed to me.
Anyway, on Monday it looks like this trade is going to work in a big way. I buy as the downside consolidation breaks to the upside in a big way (last green bar on chart)... until the very next hour bar gave it all back.
And gave more back the next day and then the next. I get stopped out:
Now that the gap is filled, I would not be surprised for FUEL to bounce off the 50Ma and then continue to make the run I thought it would. I will not be upset if FUEL bounces in a big way tomorrow. Shit happens.The funny thing is I'm not nearly as upset with myself as I expected I would be. I had my plan and I traded it as flawed as it may have been.
The question is now where do I go from here? Do I take a short break to refocus or do I get right back on the saddle and get back to what was working. I has tempted to close out my HCLP trade since it is profitable to get back in the win column. But I ultimately concluded there was no reason to sell. It continues to consolidate and could breakout in a big way if it gets over 46. Do I want to miss that so I can make a 1.5R profit? Not really. At this point, I'm going to see what the market gives me. If there is a compelling trade I'll take it, if there isn't I won't. What I will do is tighten up my risk parameters. I'm going to put myself on a diet of .5 R.