October 2, 2014

Trade Recap - LAKE

Here is a daily chart of LAKE on Oct. 1st.


As you can see, this puppy was up big time and on serious volume. Apparently this company makes HAZMAT suits--and with Ebola being diagnosed in the US--the market felt this company may benefit because there is no tested vaccine and the one that supposedly works has run out. Anyway, I could care less; I'm a technical trader.

So I pulled up the intraday chart after coming home from work and noticed LAKE started a small re-tracement towards its uptrend line.



Being that this was the first green candle on the daily chart, I was long biased, despite LAKE's huge range. In this market, actually every market, the saying goes, "The trend is your friend." Moreover, I felt shorts were loaded in this stock based on the twitter traffic; therefore, I felt any decent pullback that didn't continue to flush would be met with a pop into the close. So I selected my entry at the uptrend line and set my stop a prior support.

LAKE pulled back, my order filled, and the stock continued to pull, hitting my stop. The uptrend line failed. So now I went into sniper mode looking for any sign of a trend reversal into the close that would panic shorts. And that's exactly what I got.

The downtrend line was broken in the last ~15 minutes of the trading day and I looked to enter at LAKE's next pullback. I got the pullback and entered long at $8.90 with a risk at $8.70--letting the stock tell me when to buy, not the other way around.

So since I had a 20 cent risk, I wanted at least a 40 cent profit--remember 1:2 or better risk to reward ratio--and set my price targets accordingly. LAKE popped into the close and I sold after-hours at $9.21 and $9.32.


To sum up:

Strengths:

  1. Daily chart was great, first green candle, and good volume
  2. Set risk and two price targets for both entries before getting in the trade
  3. Cut losses fast on the first entry
  4. Wait for LAKE to tell me to buy--breaking the downtrend line

Weaknesses:

  1. Didn't notice TKMR was tanking (another Ebola stock apparently), which pulled LAKE down too around my first entry
  2. SPY was down a ton, -1.24%--i.e., stocks tend to follow the overall market

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