I was watching COH this morninig after a large gap up. I was watching for a play off of the long term pivot at 57.50 which is indicated in the daily chart below.
My first trade is a good example of what not to do. I have studied a lot of material from the SMB Capital Trading blog, and I recommend that everyone interested in short term trading check out their site. One of the major points of their methodology is to avoid trading stocks in the middle of a range and keep to entries around major levels. In the trade below I gave in to the "fear of missing the move" emotion and decided to enter the trade based on emotion instead of near a decent level. My target was the high of the day set near the open at 28.40. I saw that the stock had been supported in the 57.70s and jumped in too early. Risk/reward was decent but the success rate of a trade too far from longer term support is poor at best. First trade shown below.
I was stopped out of that trade once it went over 10c against me. I still favoured the long trade and quickly realized my mistaken entry. I did a quick r/r calculation and figured an entry in the 57.60s with a stop below 57.50 was a good setup for a high of day target. This trade is shown below.
A second lesson in these trades is about position sizing. My entry here was one where I would classically trade with larger than one risk tier. This is because we are showing strength in a stock that has already gapped up significantly. It reversed a small give back in the morning and again moved above a long term pivot (57.50). This is a good win rate type of trade. If I had another tier of risk (position size) then I would have had something to hang on to for the continued ride upwards and more profit. The lesson here is that position sizing is key to maximize profits. Selling at the HOD was a good idea for the first tier, but I left money on the table by being too timid in position size. Lesson learned, resolve to not make the mistake again.
A few lessons learned today. Nice to have time to post again. Good luck with the close today everyone, and happy earnings season!
Sean
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