VRNS: Stupid is as Stupid does but dumb money prevails

I violated my stop.  Not a good Idea.  I was rewarded with a reversal a day later: 

 I note my mistake so I make a habit of avoiding this type of trade and don't just see a gain in the trade column.

In retrospect my stop was too tight. (I did not exceed my 2% rule, even with the broken stop).  My initial trade of VRNS identified 20 as the stop.  I should have used that same stop instead of 21.

So why did I stay in?  Low volume pull back, wide spreads and I rationalized that the VRNS was trading at a market cap, which IBM offered to buy the entire company several years ago.  Stochastics are under 6.00 so its very overversold. Others stocks in the sector were bouncing, etc..

The point is I can justify an number of reasons to stay in a stock.  More often than not I will lose money by pulling this type of stunt.  So 50 push ups as punishment for not sticking to the trading plan.

MEA: closed

This one went horribly wrong.  Broke about every rule.  No stop, no trend.  Didn't take the profit on the rally back to three.    I attempted to pick a bottom, without a net (I.e. Stop) on 2k shares.  Dropped a grand in all  (More than my allowance).

AMGN: Post Triage

4-15-12- AMGN: Stopped out

This was  a bad trade all the way the way around.  Went for -783 in violation of the  2% rule in execution. My buy stop was not high enough So I was stopped in without a breakout.  I set a stop, with stop limit. at 66.10.  Remember: stop limits are for offense, Stops are for defense.   My stop limit was gapped, so I pulled it.   It cost me an extra .60 cents causing me to violate my 2% rule.

This chart still doesn't look like a break down or a break out.  It's probably closer to a break down.  But had I taken a smaller initial position, I could have had a wider stop.

4-25-12: what might have been:

So the underlying theory was correct.  As it hit 70 today and closed near a high.   I bought too high without a real breakout  and got sucked back into the channel.   A wider stop would have worked.

Anyway,  I think I can learn from watching this.  If it continues to run.  I can adjust my entries  to a break outs, or determine whether to look for an entry on support of the channel.  A buy at 66 would be looking great right now.  Yet that's where I got stopped out.

REE: Update

REE sold off nearly 8%.    I've had a long standing buy to cover order at 5.36 for 1/3 of my position.   5.36 happened to be the low of the day earning me a 100% grade on the exit. Woo hoo!   This looks like a sick dog, but I wouldn't be surprised to see a relief rally because the sell of was so severe.  Anyway by taking profits, this will let me ride this much lower.  I'm triggering low 4s.

Triage:  In retrospect, this was a bad trade with many broken rules.  I fairness to myself, however, I took the position before I created the rules and before I had started the impulse system.   It's evident that I initiated this trade way too early  into a strong wave of buying.  The impulse system would have prevented me from taking this trade when I did.   Because I was only short only 200 shares I was able to ride out the position.  Also, I felt comfortable with the fundamental reasons for this short as I had researched it extensively.     

I entered this after a large move by selling ITM calls (short shares were scarce).    There was no MACD divergence at the time however,   Had I waited until that occurred I would have gotten short at least $1.50 higher.   My second entry was nearly 1.00 higher.  So I averaged into a losing position,  usually not a great strategy. 

PZE

Found this in a multiple bottom scan at finize.com. It had a nice pop to 17, and then pulled back to the value zone.  If value holds, the uptrend continues,   otherwise, I'll look to exit quickly.

Weekly, Impulse gives the okay to buy,  13 Day EMA ticking up.  Bullish divergence on MACD and Force showing weaker sellers.

Buy at 15. 61, w stop at 14.94,  target 16.75




Day 2.

Got the stock this time but not sure I wanted it.  Got hit with a big red candle.      I manually pulled the stop when I had mistakenly put a stop limit, instead of a stop.  The specialist traded right over it.

Lessons learned:
Use stops, not stop limits
Don't trade light volume stocks.

The entry scored a 19.   Perhaps splitting up the buy order would help get  better entries.   Rule No. 6 was broken on the entry.

The drop today turned the impulse bar Red.  If no rebound get out at market

MACD shows a series of higher lows since Oct.   But should have I waited until the signal line crossed again to the upside?   More research needed.

IDCC

This is what happens when the sirens call and no plan is in place.   IDCC was a take over candidate after  it announced it was on the auction block.    The announcing of the auction, bid up to massive levels.    The Nortel patent auction recently obtained around a $5 bid.    Commentators were saying that IDCC portfolio was better and it could fetch higher valuations.  Common consensus at this time indicated around $118 a share.     In other words, a huge profit!!

Looking at the chart, there appeared to be a base forming.

Position initiated on 8/11/11
Chart at time of the initial position

Bought s at 70.51 and again at 68.10  I increased my position as I got caught up in the bullish move and doubled the position.  

It appeared to work.
Within days IDCC ran up to 76.82,  meaning I was up to a $751.5

It was a wild week,   I had a big run up and then NEWS!  Google announced that it was buying Motorola for 12 Billion.    Google was perceived as the best potential bigger and IDCC got smacked.

The next day it traded as low as 58.38. but within days backed over 70.  I held on.   Over the next few months it was a bumpy ride but definitely a ride lower.  IDCC appeared to be making a base in the 40s.

   I never should have been holding a stock that I bought in the high 60s in the 40s.  I knew better but I did it anyway.  I thought that there would still be a buyout.   I sold a bull spread.   March 44C for $4.00  and bought the 48 for $1.90 ($1.10 credit)  The thinking was is there was a buyout my long stock would effectively turn the spread into a 1X2 backspread.


Then IDCC announced that it had failed to find a buyer for the whole company and the stock gapped from about 45 down to 37 in AH trading.   I doubled down.

Its usually not a good idea to double a losing position.    I viewed the additional shares as a different trade.  I like the gap fade trade.  Idcc then traded down to $35.   In retrospect, even from a gap trade, trading in AH was a mistake.  I should have waited until the open the next morning.

I also sold off the 48 march calls for whatever I could get for them, which turned out to be .30.    I decided to hold the 44 short calls.

But as I suspected the big move would put in a bottom, and Idcc began to trade up.   Then the company announced that it missed revenue.    There was another gap down.  I thought it would be possible that it would trade up from there on the theory that the previous gap flushed out all of the sellers.  For a while it looked like that might happen but by the afternoon it started to trade lower again.

I decided to finally throw in the towel.  Sold 1/2 @37.65 and 100 @ 37.58.   I also closed out the short calls for .69.

Chart when position was closed

What an ugly ride down.


Conclusion
  I broke the Rules repeatedly and I paid.   This trade along with Alexander  Elder's book is the reason I started this blog.  I want to be able to assess why positions are taken and take detailed notes through the process.