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NASDAQ: BIDU trade post mortem

I made a mistake in my trading today, and wanted to talk about it here.

As mentioned this morning, I went long NASDAQ: BIDU in hopes of a swing trade.

The reason for going long was because I saw from last week that BIDU had bottomed out before the rest of the market bottomed out (Oct 4).  On Sept 30, BIDU went up from 101 to 114 and stayed inside that initial first thrust for the next 3 sessions.  On Oct5, it formed an ascending triangle pattern inside the initial first thrust, and finally broke out to the upside in the last half hour.  That breakout was confirmed next day with a rally off a huge gap up, although this confirmation event happened the day after the market rallied (last hr of Oct4, follow thru buying on Oct5).  It is worth noting that BIDU follows the general market trend, but is also demonstrating the ability to trade independent of market bias for that particular  session.

I really liked how BIDU gapped up and rallied on no news, and that to me was confirmation of change of trend.  The plan was to buy the dip.  BIDU sold off right from the opening minute on Friday morning, and I knew that my opportunity to buy the dip was coming up.  I had drawn a support line at 118, and when BIDU overshot the support, I decided to buy at 117.4 (green arrow).   My stop was at the red arrow (114), as my rationale was if it continued to sell of that much (over $10 drop), then the  chances of a gap fill would be much higher.  My mistake was not that I went long too early, but that I wasn’t fully prepared for the trade.   Average Daily range for BIDU was just over $8 over the past 10 sessions, so had I known that, I would have waited for the potential for another drop closer to 115.  I realized that after I had made the trade, so I decided manage that risk by exiting 1/4 of my position at 118.

My initial target for the trade was 119 and then hopefully gap fill (121) after that.  As it approached 119, it stopped, and hesitated for over 20min, unable to sustain any moves above 119.  It was at that point I decided to move my stop to b/e.  That was my second mistake.

 

Ideally, here’s how I think my trade should have been executed:

1) Long BIDU 117.4  (green arrow)

2) Sell 1/4 BIDU @118

3) Buy 1/4 BIDU 116

4) Sell 1/4 BIDU 119,  raise stop to 115 (blue arrow)

5) Sell 1/4 BIDU 120.8, raise stop to b/e

6) Hold 1/2  BIDU for swing trade.

Because my initial stop was 114, this would have been a very realistic trade execution.   But because I moved my stop to breakeven too soon (step 2, before session low was in, instead of step 4, high probability that session lo was in already), there was no chance for me to execute the remainder of my trades in the way that I wanted.

I was actually concerned that I would be stopped out had I left my stop at 114.  In all honesty, fear overcame my rational thinking.  I was unwilling to accept another losing trade, and that fear was the cause of my trade execution mistake.

Ok, so if I am fearful of being stopped out, then here is a more conservative scenario that I can execute until I gain more confidence:

1) Long BIDU 117.4  (green arrow)

2) Sell 3/4 BIDU @118

3)  raise stop to 115 (blue arrow)

 

I made a little bit of profit on the BIDU trade  (1/4 position @ $0.6, 1/4 position @ $1.2), but in doing so, I completely eliminated myself from the possbility of making larger profits.

Hopefully I can improve upon this in the next trade.

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NASDAQ:BIDU update

out another 1/4 position of my BIDU long at 118.6

moving stop to b/e on remaining 1/2 position

NASDAQ:BIDU update

out 1/4 of my NASDAQ:BIDU long position at 118. purely for risk management reasons.Holding 3/4 position, stop raised to 116
update and analysis later tonite

NASDAQ:BIDU signal

just went long NASDAQ:BIDU 117.4, stop 114.update later tonite

NASDAQ: AMZN trade post mortem

Here is the chart of NASDAQ: AMZN:

Amazon had undergone 4 sessions worth of selling. Overall market sentiment indicators (NYAD, TICK(8), BPSPX, RSI(3)) all showed that conditions were sufficiently oversold such that a bounce could occur.  So naturally I looked for a reversal.

The first reversal (from 202 – 209) I let it go because this was the classic first thrust and usually first thrust usually exhaust themselves, reverse, and search for support.  As it turned out, the search for support took most of the session.  Amazon kept dropping, as buyers were unwilling to step up.  We got back to the location of the initial first thrust – 202.  Lo and behold, buyers stepped up there again, in the last 45 min. of the session.  How did I know the second move up was for real?  I didn’t know whether it was for real at the time, I was relying on pattern recognition and past experience.  The pattern of reversal that I saw was a break above the EMA and VWAP on a the longest green candlestick of the session.  Again, I had to act fast upon recognizing the pattern of reversal, and I bought where the green arrow is on the far right.

In summary:  market sentiment indicators supported a reversal of trend hypothesis, combined with the 2nd attempt to break above EMA and VWAP on a long green candlestick was my thought process and plan for a high probability trade.

As it turns out, today’s price action contributed to a hammer reversal on the daily.   The criteria for continuing to hold for a swing is simple: a close above today’s close 212.  212 is becoming more and more important, because it is :

a) the location of  Monday’s close
b) just above the 50d SMA.

This morning’s open was 209.62, so any sustained break below 209 would make me consider looking for an exit to my trade.   That means I should move my stop up to something like 203.

My initial target of 212 has already been met, and I have already exited half of my position.  My next 2 targets for this trade will be 215.5 and 219. 215.5 is where the 2 green arrows are.  I will exit 1/4 of my position or all of it, depending on market conditions.  Regardless, I will exit everything by Thursday afternoon at the latest, because I do not wish to hold into Friday morning pre-market’s NFP report.

NASDAQ:AMZN signal

went long NASDAQ:AMZN 205.5, stop 201, 1st target gap fill 212

update later tonite

NASDAQ: AMZN trade post mortem

As mentioned this morning, I went long AMZN at 215.4.

The reason I went long was simple: the 215.5 level was an area of prior support.  I was also observing the stock at that level, and I could see that the stock started to slow down and hesitate at that price.  It turns out that my thesis was correct, as buyers showed up right on cue at that level.

However, because the market was weak, and Amazon was in a downtrend the 2 days prior, I had to put this trade on a tighter leash than usual.

My thought was that if AMZN could hold 219 after the short covering first thrust on the favourable economic report, then there would be a chance that I could hold it for a swing trade.

I took partial profit on the break above 218 because I needed to show something for my efforts in case the trade did not work out.

AMZN not only broke above 220, but it also pierced the 221 level.  I knew that these levels were unsustainable, but the more important thing that I was looking for was buyers on the pullback.  As I watched the market action while it churned just under 221, I saw that many other stocks were acting weak at the time.  In fact, things happened really quick, and I had to be very alert to recognize the pattern of weakness in the market: Futures were acting weak, and the response to the better than expected economic report was anemic.  There was no leadership in the market, and it looked like last week’s weakness would spill over into today’s session, despite the 1st session of the month and 1st session of the quarter being traditionally a strong, dip buying session.

Once I recognized the pattern of weakness, and how AMZN was unable to trade independent of that, I quickly decided to get out of my remaining half of the long position.

My swing trade started out as a daytrade.  However, it stayed a daytrade, as it was unable to survive the ongoing assessment and criteria for turning into a swing trade.