Home > Trade Replays > Taking profits in a choppy market

Taking profits in a choppy market

     After stalking WDC the past month, shorted it towards its bottom on 1/29. After a low volume bounce for three days it sold off with the rest of the market last week, but was unable to make new lows formed on 1/29 at $37.63. During Friday’s sell off, WDC was one of the last stocks in our basket to make lows of the previous day and when it did it only dropped by 23 cents to $38.16(well above 1/29 lows.) It then preceded to begin a nice up-trend on the hourly and the buying in the overall market helped it bounce up to $39.61. Although in a down-trend on the daily for the past few weeks it had seemingly found support.

     Today I was looking for a continuation of the hourly trend and to go long if it broke above the previous day high. Opened 10c above it, sold off to 10c below and then blasted up to $40.19. Got into the pullback at the bottom of its opening range. Had a great entry price with a good place to manage my risk in case the market went sour. It bounced from the lows 50c and was in the money on the trade only to have it pull back after failing to cross the figure. It retraced 30c and then bounced again.

     Having a good entry allowed me to hold it through the noise and again bounced back to the figure, but was unable to cross. Took some profits after this 2nd failed attempt and would wait for it to break the resistance at the figure. Got long when it broke and rode the stock up to new highs as it began again trending with the market. Took profits after it made new highs and came back into the opening range. It chopped around for the rest of the day and ended coming in to the lower end of the range.

    For tomorrow: Today WDC forms a melted candle, noting the indecision with this stock and in the overall market. Will look for it to convincingly break today’s high before  looking for another long position. With the lack of follow through today, the downside could have the bigger move below today’s low. So right now, there is no real edge as long as this stock stays within the price of 1/29 low of $37.63 and 2/03 highs of $40.92.
    The overall lesson though for today was to take profits a little more aggressively as the trade was against the past 3 weeks overall order flow. Presently there is no real edge in the stock until it can break convincingly out of the box it is in. So any trade’s (long or short) will be taken with a tight leash until it can establish a stronger direction on the daily charts.
  1. February 16, 2010 at 6:55 am

    Thank you for all the great posts from last year! I look forward to reading your blog, because they are always full of information that I can put to use. Thank you again, and God bless you in 2010.

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