DummySpots.com

IFO is Infosonics Corp. Trades on the AMEX.

I’m likin’ the way this chart looks. If stock charts were Playboy, the ones like this would be Centerfolds. A break to the upside on huge volume, then a textbook pullback on fading volume. Have a look while I go take a cold shower:

What I’ll be looking for:

• Entry tomorrow: Long above today’s high of 7.60 with a stop at today’s low of 6.81.

• Position size? Purely based on risk, not price. One of the great quantum-leap realizations in my trading life.

  I’d be comfortable losing $150 on this trade, so with a risk (or “R” if you like) of 0.79 (entry price - inital stop), I’d need to buy 150/0.79, or about 200 shares. Sometimes I have to buy $40,000 worth of stock to put $150 at risk. Here I’ll be buying about $1500 worth in order to achieve the same goal.

  Oh, and if you’re wondering why I wouldn’t buy 10 times that much stock, after all, look at how much I’d make if it goes to 12… well then, you ain’t got yer mind right. Stay away from the boats and Vegas.

• If tomorrow prints another lower bar on low volume, I’ll reset my entry rules for the next day based on that bar.

• If tomorrow prints a long black candle on increasing volume, I’ll forget the name of this company by bedtime and never look back.

12 July 06

Ok. Day 1, trade taken. The market was ugly with a capital “ugh” today. Dow -122, Nasdaq -39. Not the best day to go long. However, although tomorrow could be either a beautiful rebound OR a serious breakdown for the market, today was neither. IFO hit 7.60, I took the trade. Rules is rules.

Here’s the chart:

Inverted hammer. Bullish “if there is follow-through.” Duh! And futher withering volume. The low volume is encouraging, given the candle. A long white (blue) candle on above-average volume would have been pristine. Pristine doesn’t happen much. Welcome to trading.

The next 1-3 trading days are like the takeoff of an airplane: the most hazardous time. Let’s watch.

13 July 06

Got stopped out quickly this morning. My stop had trailed up to 7.20, just below yesterday’s low of 7.26.

The open today was something of a mess. I ended up getting out at 7.04.

C’est la vie. I could poormouth about the entire market breaking down, yada, yada, yada. But I’m not. I set my rules, I followed my rules. I got stopped well within the range of what I considered an acceptable loss. On with the show.