08 Apr 06: SIRI Trade Triggered
We got the break of 5.29. Check out the nice long “up” bar on huge volume Thurs 4/6:
What’ll I do now? Follow the rules! Check out the last post. I had my rules for the trade in place before the break happened.
The absolute worst thing one could do at this point is start modifying the rules once the trade is on, even if that resulted in a larger gain. Why? Because that’s based on emotion, it’s not repeatable, it results in a worse outcome most of the time… and in the unfortunate event that it results in a better outcome, it reinforces losing behavior (in this case, letting your emotions dictate your trading decisions).
So, what to do now is the easy part. Follow my rules, win or lose. If it turns out to be “lose,” look at what went wrong, consider whether to modify the rules. Then on the next one… follow the rules again.
As I’ve said, I look to get my stop moving ASAP. I’ll start doing my “personal PSAR” calculations based on next week’s action (hey, this weekly-bar stuff is much better on the blood pressure than 5-min bars!), and assuming it doesn’t fall right back below $5, I’ll have a stop at least in the high 4.90’s by the end of next week. Unless the thing breaks upward really hard, in which case the stop will end up being higher. That’d be just fine. 
Easy money from here? NOT AT ALL. Notice that although the S&P broke 1310 and the NDX broke 1720 as I’d hoped, the S&P sold off hard to the tune of about 17 points on Friday. But being spooked out is not an option, only being stopped out. Rules is rules.
12 April 2006: Market and SIRI near inflection point
Time to check in on the market in general, and the SIRI trade in particular.
First, the NDX as revealed thru the Qs:
Today (4/12) was an nr7 and then some. I think the last time the Qs had a range of less than 28 cents was a couple of months ago. Combined with today’s very light volume and round-number support at NDX 1700, this little doji could be an inflection point marking the end of a pullback into a newly-formed uptrend. That would be the good news.
The not-so-good news is that the Qs sit firmly below their 10-day moving average and just below the Fibonacci retracement of the recent ~40.80-43.00 range.
We’ll know the next verse of this song soon enough.
On to Sirius. Here’s a 2-month daily chart with a 10-day moving average thrown on:
I wanted to point out how, since its break on 03/17, each pullback to the 10ma has met with support, and we’re right on top of it again.
Now to zoom in a little to a 1-month chart:
Notice the textbook pullback pattern in both price and volume. Shoot, if the overall market were a little less wishy-washy, I’d be looking to put on a swing trade based on these daily bars. That’d put me in the odd position of having two different trades in two different time frames on the same stock. Different position sizes, different stops and all! Personally, I’d have no problem with that.
It’s not unusual at all for a stock in a long-term uptrend to have a shortable pullback, or vice-versa. Each time frame presents its own trading opportunities and risks, and I still maintain that jumping time frames (even if unknowingly) during the course of a trade is one of the greatest mistakes we make in trading. Zooming out to a larger chart to find an excuse to stay in a losing position, for instance.
Anway, here it sits. The market is looking like more of a big fat failed double-top than a pullback into an uptrend, but I cannot be spooked out of a trade. The market has to take me out. If the NDX and S&P keep falling, and SIRI ends up back in the 4.90s, that’s exactly what’ll happen. Otherwise, I’m just managing my stop and letting my trade run.
Let’s watch. Cheers!
22 April 2006: Stop Hit on SIRI Trade
On the SIRI weekly-bar trade mentioned earlier, my trailing stop of $5.04 was hit yesterday (Friday 4/21). The entry price was $5.29, so the trade netted a 25-cent loss. Small loss, taken by following da rules. Pat self on back.
Now, getting stopped by no means indicates that SIRI is headed down. In fact, if anything, the flagging volume on the recent down bars should be encouraging to the bulls.
Why not hang in, then? Because this was a very specific trade set up with very specific rules. I’m much more interested in consistently making money over the long term from following a disciplined methodology than I am in getting married to any one little trade and trying to hold on for a gain. Thankfully, my trading ego isn’t so fragile anymore.
What is in order here is a review of the rules I used for this trade, and whether they should be modified for future trades. For example:
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Should I have trailed my stop up to 5.04 as I did? Or should I have left it at 4.90 for a certain number of bars (weeks), or maybe have used a “real” PSAR which would still have it somewhere in the 4.90s?
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Should I give more weight to the (declining) volume in the future, and make the stop a little looser? (I already know the answer to this one, which is “no way,” because preserving capital is always king).
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Should I have an entirely different variation on my trading methodology for longer-term trades, like this one, where I’m using weekly bars? This question will remain unanswered for a while, as I’ll need a larger sample of weekly-bar trades to see any relevant trends.
In the meantime, I’ll continue my routine of day-trading on my days off and looking for swing setups each evening. One of those setups could as easily be SIRI as any other stock. All depends on the charts…
24 April 2006: Reminder- Stops are Good!
SIRI low so far today is $4.84 — as my caveman friends would say, “Trailing Stop GOOOOD!”
When I sold Friday based on my trailing stop, I had absolutely no way of knowing this would happen. SIRI could have gone to $6 today for all I cared. I just stayed with the rules I made for that trade at the outset. And I have so many scars from not following my own rules that I’ve learned my lesson…. somewhat…. usually.
This also serves as a little reinforcement that I should probably stick with my “personal parabolic stop” method of trailing unless I work out something that’s consistently better.