The Market Today
Short and sweet: The NDX and S&P are both still short of a much-needed breakout if the recent uptrend is to continue.
The ideas posted last night for today have given me a lot to write about.
First, a rule that I don’t think I’ve clearly stated: a trigger for a swing trade is when the target price is crossed in the proper direction (i.e. from below for a long entry). A gap, even in the “right” direction, is cause for pause.
Think of it as a stop-limit order with an activation price at a penny above your trigger price, and with the limit at the same price. If the stock gaps 50 cents above your trigger price, the order will not be executed.
This rule was exemplified today by two of the stocks I mentioned yesterday:
HOKU had a trigger price of 4.40. It opened at 4.51. The only way to trade an open like this is if the gap holds. For instance, if it had opened, dropped a bit, then reversed through the open to finish positive, one could go long with the day’s low as a stop.
HOKU did exactly the opposite. It opened way up and basically fell all day. Nowhere to enter and still have a decent stop. That’s my clue to wait.
SWC acted similarly, but with a twist at the end:
SWC opened gap up, then fell. However, it rose again into the close and crossed the trigger price of 9.14 from below, so a trade could be taken. The weak volume and the day’s action make this one look much less promising than if it were a good strong up day. We love our Long White Lines.
Now how about the good stuff?
Today EMKR (Emcore Corp) provided a perfect entry into a beautiful trade, based on my ideas post last night. Entry at 7.51 with an initial stop of 7.38, today’s low. That’s a total initial risk (tah-dah! “R“) of only 13 cents, allowing a nice fat position size. I would cover half that position at twice my initial risk, or 26 cents above the trigger price, or 7.77. We’ve now locked in a profit equal to our initial risk, and have a free position that’s currently 45 cents, or over “3R” in the money. In just one day!
Trades like this make up for 3 or 4 of the ones where you get stopped out with a loss or an agonizing, small gain.
LTXX (LTX Corp) triggered a trade today, and although it’s not as perfect as the EMKR trade, this one’s still legit. Entry was triggered at 5.51. Today’s low is 5.33, so that’ll be our initial stop. This gives a total initial risk (tah-dah! “R“) of 18 cents. The spot to lock in some profits was 5.87, and today’s high was 5.86. Too bad. Let’s watch…
Update on the CSCO (Cisco Systems) trade:
Another new high for Cisco today, although on a short little bar. Using the same method described before, trailing stop comes up to 21.15.
Update on the CVTX (CV Therapeutics) trade:
New high of 12.13 on CVTX today. Notice that it had an opening gap reversal. Today’s bar opened higher than yesterday’s close, then rose to the day’s high, and finally failed back through the open to close within yesterday’s range. That’s ugly.
New high (12.13) minus prior stop (10.80) times about 20% gives 27 cents, which I’ll add to the prior stop.
This gives a new stop of 11.07, which I’ll round up to an even 11.10.