Corvis, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, August 29?

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, August 29?

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 … (CORV became a top unusual suspect on 8/28.)

2) Up. You’d be looking long … (This was a bit tricky since trend flipped up intraday)

3) Long at 1.28 on a buy stop above the 11:30 bar … (Look at that gorgeous narrow range inside bar!)

4) Tighter: 1.25. Looser: 1.24 … (when playing these penny stocks I find it helpful to think in terms of X 100)

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.

Apollo Group, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Thursday, August 28?

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 Thursday, August 28?

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 … (APOL became a top unusual suspect on 8/27.)

2) Up. You’d be looking long.

3) Long at 62.09 on a buy stop above the 11:00 bar.

4) Tighter: 61.86. Looser: 61.81.

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.

Flamel Technologies, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Wednesday, August 27?

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, August 27?

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 26.81 on a buy stop above the 11:00 bar.

4) Tighter: 26.62. Looser: 26.43.

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

6) Stopped out on 3:00 bar.

NaPro BioTherapeutics, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Tuesday, August 26?

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 Tuesday, August 26?

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 1.89 on a buy stop above the 11:30 bar.

4) Tighter: 1.83. Looser: 1.82.

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

6) Stopped out on 1:30 bar.

McDATA, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Monday, August 25?

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 Monday, August 25?

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 10.54 on sell stop below the 11:00 bar.

4) Tighter: 10.60. Looser: 10.68.

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.

Hemosol, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, August 22?

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, August 22?

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) Attempted long with buy stops above 10:30, 11:00, 11:30, and Noon Bars.

4) No fill, so no stop.

5) Right after you weren’t filled off the noon bar.

6) No fill, so no exit.

Aastrom Biosciences, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Thursday, August 21?

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 Thursday, August 21?

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 1.03 on a buy stop above the 11:00 bar.

4) Tighter: 1.00. Looser: 0.98.

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.

Internet Initiative Japan, 30-minute Chart

I didn’t plan to write another Q&A but I got deluged with email asking me to show a play on the short side, so here it is. When something cracks as badly as IIJI did there’s a good chance of a violent snap-back, which is a risk you have to be aware of. But IIJI just continued to collapse, so you had that going for you, which was nice (written with Carl Spackler in mind).

One sensitive soul wrote in to ask if I wasn’t giving away the keys to the kingdom with these how-to posts. The answer is that good trading is 10% methodology and 90% psychology. People defeat themselves. It doesn’t matter how often you repeat basic trading principles when almost no one will practice them.

Questions:

1) Why would you be paying attention to this stock yesterday?

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 yesterday?

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 5.59 on a sell stop below the 11:30 bar.

4) Tighter: 5.68. Looser: 5.76. (These are buy-to-cover stops.)

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.

Flextronics Int’l, 30-minute Chart

Tired of these repetitive lessons yet? Well I am, so this is my last one this week. But it’s important to make sure that you understand these very basic trading principles.

Questions:

1) Why would you be paying attention to this stock yesterday?

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 yesterday?

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 12.19 on a buy stop above the 10:30 bar. (There was also an opportunity to enter above the 12 noon bar.)

4) Tighter: 12.12. Looser: 12.03.

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.

Back in the ancient past (1997?), I hung out at Avid Traders Chat. There were a bunch of nice, bright people who congregated there to chat about the markets and trading: alice, barbarian, bondzai, colby, craig, dr. doom (Teresa, one of the few women), fiendbear, grizzly, guliver, humble, jacad (later known as samurai), jasbond, jwhite, mina, mitstop, notop, oleman, soup, swtrans, temple, topxprt, twocents. I can’t remember everyone. I was modestly known as ’smartmoney.’

Many of us pretended to be more savvy than we really were, but everyone contributed something and it was a pleasant place to shoot the bull (no pun intended). The most revered chatter was a retiree in Florida who went by the handle ‘oleman.’ Here’s some of the common sense advice about trading that he posted at Avid back in the day: The Collected Wisdom of ‘oleman.’ It’s good stuff and should be read closely.

Beacon Power, 30-minute Chart

You have to go where the action is, and yesterday that meant looking to the Nasdaq Small Cap Market. The purpose of these (repetitive) Q&As is to hammer home basic trading techniques. People like to make things hard, but keeping a simple approach is best.

Questions:

1) Why would you be paying attention to this stock yesterday?

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 yesterday?

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 0.62 on a buy stop above the 11:30 bar.

4) Tighter: 0.57. Looser: 0.54.

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.