Weekly Update 2017-10-21


Pending order : DRNA
Cancel order : GRUB (near earnings announcement)

Weekly Review

Last week activities :

Managing Position

My total risk from equity already more than 4% and the market is at a new high. This combination could be a sign that I have taken too much trade and that trades didn't move as fast as I hope. It makes me unable to move the trailing stop. Actually, It happened by design as I activated "Risk On" mode to take higher risk to pursue higher reward. As I achieved my objective (to pursue higher reward) by taking several riskier trades, now I need to keep my equity curve smooth by limiting my total risk.
The logical choices to limit and reduce the risk are :

  • Do nothing. Patience and wait for the price reveal the true direction.
  • Move the stop loss quickly if bad price and volume action happen (this choice will lower win rate stats).
  • Tightening the trailing stop to protect the profit.
  • Time exit/scale out on trades that didn't move in too long period.
  • Scale out on floating profit position that near resistance level, near measured move or display reversal sign.
  • Trade only grade A setup.

I'm planning to do the combination of this 6 choices depends on the price, volume action and the market feedback. Next week, I'll trade only if grade A setup available (favorable fundamental data + great technical setup), I'll do nothing on most of my current position. I'll consider to time exit and scale out for some position, partial exit by tightening trailing stop on YNDX (I did it on last Friday). In short, I'll be back to "Risk Off" mode until my total risk is reduced.

MITK : Symmetrical triangle possibility

I bought MITK on 7/31/2017 when it's pullback from good breakout. After that, price formed pennant pattern but failed on 9/8/2017. Price found support on 9/25 at 9.35 then stuck in tight channel. It can be said that failed pennant morphed into 3-months symmetrical triangle. I should scale out position when pennant pattern failed, but because of low volume, I decided to wait until more volume pick up (either it will be breakout or breakdown). For precaution, I moved the trailing stop to 8.95. I am considering to exit manually if price breakdown and closed below the low of the tight channel (9.25 area).

YNDX : weekly trailing stop hit

YNDX struggling at overhead resistance and losing its bullish momentum so I decided to use weekly trailing stop rule and manually sold 50% of my position. I adopt this trailing stop rule from Peter L Brandt's book (Diary of a professional commodity trader). This is a good rule for tightening stop and similar with 3 bar stop technique (used mostly in forex). If you want to know more about this rule, just fill the comment box below or send me an email.

Further study

I don't have a plan to take a new position for next week (except If I find grade A setup), but the study will never stop.
The problem with taking a trade in the market at a new high is the bullish market force will help to push the stock price. If you still have a room on your portfolio and willing to take a new position, please pay attention to the RS line. If price breakout not followed by RS line breakout, it means the breakout on price happen just because of the bullish market force, and the breakout has big possibility to fail if market experiences pullback.
Below are some interesting charts to study:

I : Good chart without good fundamental

I (Intelsat S.A.) breakout from near 2 years ascending triangle bottom with good volume. The problem is Intelsat don't have good fundamental data. The balance sheet is still weak because the debt burden is still high. Intelsat earnings also volatile from year to year. They have good operating cash flow but the capex is big enough to shrink the free cash flow. For those who want high risk high reward trade, this setup could be a good match. Ideal buy point would be on the pullback at 5.5-5.8 area or 1/2 distance of breakout week candle. It's also a low level from breakout day candle. Because of the high risk, the potential reward will be high (5.9R).

APPS : Good chart without good fundamental

APPS is a micro-cap stock. It only has $97.3M market cap and price below 5. This trade setup is riskier than I (Intelsat). From 2012-2017, APPS still has minus earnings, minus cash flow and need the capital injection to support their operation. This is similar to startup business. From the growth perspective, APPS shows good revenue growth since 2013 but net loss also swelling.

From the technical perspective, APPS pullback from bottoming pattern breakout. Personally, I can't classify this setup as H&S bottom pattern as the right shoulder high failed to touch the neckline. But this doesn't mean this is a bad chart pattern. This chart shows some accumulation signs. It has "up on big volume" inside the pattern (Sign of strength), "low volume on the pullback" and "big volume (but below $10M) on the weekly breakout". For those who don't care about fundamental, current price could be an opportunity to buy. Another scenario is to wait until the "true" right shoulder created(look at tradingview chart)

Current Risk Position

That's all for this week, have a good week and thanks for reading.

Have you ever feel that you're already know all of the trading theory, but you haven't got consistent profit yet? This site is dedicated to help you about that. You will get optimal learning benefit if you not only read this article, position yourself as me, track my account by reading all the updates and log, see my open and closed trades in action and learn from my mistakes, look to my dashboard and performance, read what I thought about trading. Also, whenever you have a question about trading, feel free to contact me here.