$SLS Main idea:
The stock has some fundamental reasons including some warrant’s that made me interested in this stock, also the fact that it topped out in pre-market at a previous resistance level made me convinced that this was a good candidate for a short, but as I missed the pre-market top I didn’t want to chase weakness so I planned to enter into market open as I’m still a bit insecure with pre-market trading, It just doesn’t feel right to me at this stage of my trading. So, I made up a plan that included “what if” scenarios for the open, ex:
What if spike at open: - Wait to see where the stock stuffs, have in-mind pre-market resistance + previous resistance
What if fade at open: - Wait for the stock to confirm that the fade confirms the snap of momentum by a big enough drop that it’s not likely to recover from, then wait for a bounce to short into.
And as it turned out the stock faded at open and I waited for the stock to bounce so that I could short into it, I got a good short at $1.89 of 1k shares. Then as we rejected I immediately took some off at the low of the bounce level, this is something that I’m going to work on to improve on to not do as there is absolutely no reason for me to cover here if I believed in my thesis. But well I might have played the stock with to big size and therefore it got me nervous as I’m not used to playing these less liquid plays. And don’t get me wrong its liquid but it’s moving much slower and trades much less volume then what I’m used to.
But after I had covered 200 shares at the low of the bounce ($1.84) I stayed patient with the rest of the shares, or at least until the next drop. Once we came down to the $1.74 area I had already pre-set an order to cover ½ at $1.7 which I managed to get filled at.
Then I don’t really know what happen, I was way to uncomfortable with holding the rest of the shares on this stock as it wasn’t my “ideal” play and the fact that there was some previous support at this area so I took the rest of as we held up just minimal in the mid $1.7’s.
Ended up with an AVG cover of $1.763 and a short at $1.89, This is not my usually play and especially not my usual % gain, I usually strive for a 15-25% gain but I also want to become better at these small “scalps”
Things I did well:
Executed the plan – That I executed the plan that I had pre-planned is something that I should be proved of as I’ve been having trouble with executing my plans in the past.
Paid myself – Even though I covered way too early today and didn’t have any patient at all I still want to give myself creed for developing a good habit of covering along the way to stay stress-free of a trade.
Things to improve upon:
Believe in your plan – The fact that I covered almost immediately after we got the rejection of the bounce shows that I don’t truly believe in the plan that I made today, and I have to work on changing that so that I start to believe in my plans.
Pre-market trading – I’m going to work on understanding the mechanics of pre-market trading and how it differs from open hour trading.
Main idea/thought process:
$TOPS is a stock that I’m quite familiar with since a couple of months as it has prevented some earlier gap and crap type of moves, and therefore I also know that they have some really sketchy things in their filings, they also have a ton of bagholders as it’s trading at the low of the chart’s range. So as I saw this gap up pre-market I knew that this was going to be a stock that I would be really interested in playing.
But as I’ve expressed above with SLS I’m still not confident trading in the pre-market action and therefore forced myself to stay away from the ticker until just 30 minutes before the market open to get prepared for the open. But as just 30min before the open, the stock had basically given all its gap-up gains back and didn’t leave much meat left on the bone. Because really, we were down in the high $1.5’s in pre-market and at this point the risk/reward isn’t ideal, also because the whole time period between mars to late may the $1.5 had acted as support, so the potential reward wasn’t ideal in relation to the risk.
So, I basically just put the ticker away and focused in on $SLS as my morning trade. But I hadn’t forgotten about $TOPS because it really has some sketchy filings with a ton of dilution so I knew that this “shouldn’t” be up fundamentally speaking. But as I’ve learned I’m not to good at picking the top of these plays so I formed the very simple plan of waiting until the chart clearly showed me that the momentum had snapped and then to enter into the first follow up bounce.
And that turned out to be the case, we got that double top and then a nice momentum crack that totally confirmed my thesis that this was toast. So, I stalked for a bounce, and since you never really know how big the bounce is going to be I somewhat ended up chasing weakness as we got that first red candle that “faked” me, but I understood that this was somewhat of a chase so I only entered 2/5 of my position. Then I ended up top ticking the bounce off $2.44. How I managed this was as I thought it wasn’t going to make it to the $2.5 and also probably start struggling already at $2.45 after that big drop so I pre-entered at $2.44 to make sure I was going to get filled if we were to test those levels.
Then I simply covered my first 1/5 into the first wash and using the intraday chart’s support levels as guidance. Then when we got that second wash I was stalking it to see If $2 was going to hold up or just break down like warm butter, but it ended up defending so then I decided to rather be safe than sorry so I took off 2/5 of my position so that I was able to be more patient with the last 2/5. I planed upon swinging the last 2/5 until market close but got to scared by the thought of getting stuck in a market close squeeze so I made a quite bad job of covering up. Where I covered the first 1/5 into a bounce that was just in line with the original first bounce… which in hindsight would, of course, have been a really good add, then I covered up the last 1/5 into the bounce of the washout… totally unnecessary.
S 200 at $2.32 – 13:09
s 300 at $2.44 – 13:12
C 100 at $2.17 – 13:24
C 200 at $2.06 – 13:39
C 100 at $2.26 – 14:59
C 100 at $2.21 – 15:20
AVG entry: 2.392, Exit: 2,152 (9% gain)
Not chasing – The fact that I somewhat chased at my first entry as the first red candle came across wasn’t totally cool but that I’m still fine with, what I’m a bit disappointed about is the fact that I chased into strength with my covers and that I totally failed to zoom out and see the potential outcome of the bigger picture of that potential rejection up upon that first bounce, and that second failed bounce after that washout/confirmation… yeah, that really sucked… But hey! Now I got a reminder ; )
Re-entering – Once my thesis is confirmed and I get that first drop + bounce + further rejection I shouldn’t be scared of a rebound higher/ squeeze, I should rather see the play as totally confirmed and look for opportunities to re-enter the trade as my thesis has been totally proven correct. I have to work on not being to hesitant if my thesis is correct or not, and I have to work on re-entering as long as my thesis is intact.
Size up “brah” – I have to keep on working upon believing upon the thesis and myself as it has turned out that these rejection plays have really been working out well for me, and the next step towards believing in myself and my pick rates is to start taking on bigger positions. This does not mean though that I should start sizing in way beforehand of the first failed bounce, I still have to be exactly as causes about the potential risks and remember myself not to get cocky just because I’ve found success with this setup a couple of times now. NO SETUP HAS AN 100%-WIN RATE.
Sympathy plays – The fact that I totally missed $ESEA which was straight up a sympathy play too $TOPS, I have to remember myself to check out for these in the future, as they move in sympathy that generates 2 opportunities rather than 1.
Not covering to fast – The fact that I really waited for the stock out to get that first washout after that first bounce was a really big step forward in regards of my development within this setup, this proves that I believed in my thesis and that I was somewhat stress-free during the development of that bounce consolidation on its way down.
Paying myself along the way – The fact that I used the intraday support areas to guide me when to cover up at and reminding myself about the key Phycological numbers to make sure that I paid myself along the way was a really great move from me. Something to work upon though is to probably be a bit more patient with my covers, not taking of that first cover, rather saving it until the next washout.