Up on no worthy news, fundamental aspect look’s sketchy + previous behavior of gap and crap.
if then scenarios:
If spike: let spike and look for confirmation of the top with a hard pullback + technical confirmation
If fade: look for significant enough drop for it to confirm that the momentum has snapped, then wait for bounce to short into. Use ½ of drop size as guidance of where it’s going to top out at.
SS – 200 at $6.17 9:36
SS – 200 at $6.28 9:36
C – 100 at $5,95 10:01
C – 100 at $5.71 10:18
C – 100 at $5.3 10:33
C – 100 at $5.10 10:42
AVG Entry: 6.225, Exit: 5.51
Profit (11%) (+$284/ - $18 in locate/ - $8 in commission) total = +$250 ish
IDEAL: entry – 6.46 exit: 5
Today turned out to be a yet another good day for my new trading approach of shorting only confirmed breakdowns. My main play of the day was $TRPX, but also had my eyes on $RGLS & $PTI, unfortunately I missed $PIT and didn’t want to touch $RGLS as I didn’t see any significant momentum snap’s before it was down way too much for an ideal R/R, so I played it safe and decided not to develop any bad habits of chasing.
As I said in the overview the main process behind $TRPX was the fact that it was up on nothing worthy, hade sketchy filings and the yearly chart told the story of it having a behavior of gap and craps. Then I simply executed my then if scenarios as we faded at the open.
I decided to add in half of my position quite early as I thought it looked heavy and didn’t want to miss out (FOMO… lol), but was smart enough to add just half as I knew that this was somewhat a chase if it where to bounce. Then we did bounce some and I filled my other half at the $6.28, which also was somewhat of a chase, but it worked out, I wasn’t to stressed actually, and have never been with this setup really.
Then we slowly slowly started to fade back down from the high of the bounce, and I started to get really impatient about the play as it was moving so slowly, but then I reminded myself what I had told myself to work upon with this setup when it moves slow, to be patient. Although I felt somewhat uneasy because my AVG entry wasn’t the best and I was in quite big size in relation to what I have previous played around with, so when the high 5.9’s defended multiple times I decided to take of ¼ of my position just to keep my nerves and emotions in check.
Then we slowly, slowly broke that 5.9’s area and moved future down, and I thought if the 5.9’s was such a struggle what is the LOD of $5.56 going to be like?! So, as we got closer I took some of at the low $5.7’s just to once more keep my emotions in check.
But just as I had done that I soon understood why we where moving so slow, because the play wasn’t as liquid as I was used to. I’m used to going after the nr.1 play of the day that everyone is eyeing and those move much faster due to the volume that is traded on them. And as I resized that this probably is the case to why we are moving so slow I somewhat got more confident with my thesis that this where to break down. I also drew out the trendline to remind me that small bounces weren’t anything to worry about as long as they didn’t break the trend. I also looked for tape action to see if there where to be any big fish in the water covering up a bunch, because then I would have wanted to size down/get out as his covers could really affect the stocks movement.
We then broke the LOD and I covered yet another ¼ as I want to pay myself along the way since it’s hard to tell where the support is going to be at and when the stock is going to bounce significantly, especially with an illiquid yearly chart.
And then as we flushed down again I had already pre-determined that I wanted to get out somewhere above the $5’s as this is a key psychological number that for sure could have real impact upon the stock at this time when it’s down roughly 30% from it’s opening price. Something else that also made me take that decision was the fact that I looked back at the range that this stock had hade in its previous gap and crap days, and the drop range was around that 25% level, which then helped me to really confirm that I should cover up and move on. Because you have to have realistic expectation upon a stock, if the history tells you one thing the odds are much higher that It’s going to repeat itself rather than be an outlier.
Things I did well:
Being patient – The fact that I stayed patient with this play, and also eventually figured out why I thought we were moving slow was two key things that I did really well within this trade. And especially since my last improvement goal within this type of setup was to believe the setup and to stay patient.
Realistic expectations – The fact that I looked back and used the stocks past behaviors to guide me of knowing when and where to cover was also a very good move that I made with this trade. And understanding that the whole number of $5 was going to play a big impact upon the stock.
Keeping my emotions in check – the fact that I understood what was stressing me was also a really good part from my side in this trade. Because I understood that it was the size that was the trigger to my emotional reaction of unease as we were moving “slowly”. And the fact that I took the decision to simply scale down was a very good way of keeping my nerves in check.
Things I can improve upon
Risk management/reacting not predicting – I have chosen to play this type of setup as it confirms that the momentum is broken, but what I have to remember myself is that there is no setup that has a win rate of 100%, meaning that this type of setup can also fail. And what I’ve noticed is that I somewhat play this setup as where to have a 100%-win rate... more specifically I size in way too much in anticipation that the bounce is going to fail. I have to work on not adding my full size until the bounce has confirmed to be topped out to manage my risk better. Because if I’m fully sized in anticipation that the bounce is going to reject but then fail’s and bust back up towards the opening price that isn’t going to be a healthy loss as of how I’ve been playing it recently. It simply comes down to Reacting, and not predicting.
Supply & demand + patient – One thing that I realized a bit to late was the fact that there was absolutely no reason for me to stress about a potential bounce of this play, because the supply was simply way larger than the demand. And what I have to become better at is to realize this aspect much faster, if there is a ton of bagholders, and the intraday has just had a rejected bounce there is absolutely no reason as to why this should bounce as the supply simply is way bigger then the demand. This will also help me to stay more patient with the play’s as it’s an aspect that brings logic to why the stock should breakdown.