Portal Software, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, November 14?

2) Is the trend up or down? Would you be looking to get long or short this stock?

3) Where would you get long/short this stock on Friday, November 14?

4) Where would you put the initial protective stop?

5) When would you stop trading for the day?

6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.

2) Down. You’d be looking short.

3) Short at 8.44, 8.57 on sell stops below the 10:30 and Noon inside bars, respectively.

4) Initial Protective Stop: 8.86. (max. 4.98%) / 8.69 (max. 1.40%)

5) Right after you enter the position or lunchtime, whichever comes first.

6) End of day. Could cover half, carry half, or just close it all at once.

I’ve adjusted the scale on the PRSF chart so the bars are visible. When a stock gaps down as violently as PRSF did the bars become scrunched and you have to manually adjust the scale. In any event, PRSF was similar to my recent play in PCLN.

The initial stop was wide at nearly 5% so it was smart to size the trade at 1000 shares. The noon bar then presented a good spot to lower the stop, and if you were inclined, to short more shares. Since the noon bar gave a chance to risk only 1.4%, it was possible to short another 3000 shares below it, keeping the expected loss in my comfort zone by moving the stop down to $8.69 on the whole position.

The stock closed at $8.40 which gave a gain of 1.61% from the combined entry, so it was a failed trade (reward to risk of 1:1). Yes, you can make hundreds of dollars and still consider a trade a failure. People who make $2 while risking $2 don’t last long in this game.

Superconductor Technologies, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, November 14?

2) Is the trend up or down? Would you be looking to get long or short this stock?

3) Where would you get long/short this stock on Friday, November 14?

4) Where would you put the initial protective stop?

5) When would you stop trading for the day?

6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.

2) Up. You’d be looking long.

3) Long at 6.02 on a buy stop above the 11:30 down bar.

4) Initial Protective Stop: 5.90. (max. 1.99%)

5) Right after you enter the position or lunchtime, whichever comes first.

6) End of day. Could sell half, carry half, or just close it all at once.

SCON was a straightforward long play. 4000 shares was a decent size to buy given the initial risk of around 2%. The stock closed at $6.41 for a gain of 6.48% from entry… reward to risk at better than 3:1.

Everybody knows the four cardinal rules of trading, but so few people follow them:

• Trade with the trend
• Cut losses short
• Let profits run
• Manage risk

Intraday sentiment started the day flattish to down then broke quite hard in the afternoon with a burst of selling. This helped the PRSF position out but was detrimental to the SCON long.

Screen capture of my intraday Watch List:

Novell, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Wednesday, November 12?

2) Is the trend up or down? Would you be looking to get long or short this stock?

3) Where would you get long/short this stock on Wednesday, November 12?

4) Where would you put the initial protective stop?

5) When would you stop trading for the day?

6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.

2) Up. You’d be looking long.

3) Long at 8.35 on a buy stop above the 11:30 down bar.

4) Initial Protective Stop: 8.22. (max. 1.56%)

5) Right after you enter the position or lunchtime, whichever comes first.

6) End of day. Could sell half, carry half, or just close it all at once.

……….

NOVL was unusually active (it did 29,000+ trades on the day) and gave a very nice, narrow range down bar to execute against, with initial risk at only 1.56%. 4000 shares was a nice drop-in-an-ocean-of-liquidity position size. The stock closed at $8.97 giving a gain of 7.43% from entry for a reward to risk ratio of around 4.75 : 1.

The trouble that some folks have is that they’re always thinking in terms of “2B tops” and worried about getting trapped or picked off, which makes them unable to enter strongly trending markets. Catching big trending days (like yesterday) is where you make the big money. Trying to scalp 2 points a day by gaming the little traps in the S&P futures is going to make you old, tired, and cynical really fast.

The broad market moved up strongly as my intraday sentiment chart indicates (see below), so I was looking long obviously. Anyone who was looking short hasn’t learned the lesson Jim Croce taught when he wrote the popular song, You Don’t Mess Around With The Trend:

‘You don’t tug on Superman’s cape

You don’t spit into the wend

You don’t pull the mask off the old Lone Ranger

And you don’t mess around with the trend’

WebMD, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, November 7?

2) Is the trend up or down? Would you be looking to get long or short this stock?

3) Where would you get long/short this stock on Friday, November 7?

4) Where would you put the initial protective stop?

5) When would you stop trading for the day?

6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.

2) Up. You’d be looking long.

3) Long at 8.76 on a buy stop above the 10:30 inside bar.

4) Initial Protective Stop: 8.62. (max. 1.60%)

5) Right after you enter the position or lunchtime, whichever comes first.

6) End of day. Could sell half, carry half, or just close it all at once.

HLTH had an initial risk of 1.6% so 3500 shares was a good sized position. The stock closed at $9.19 giving a gain of 4.91% from entry for a 3:1 reward to risk ratio. There was a second nice entry off the 1 PM down bar which provided a tiny amount of risk as well (1.35%). Learning how to manage your risk is the #1 thing you have to concentrate on.

Screen capture of my intraday Watch List: