September 15, 2014

Trade Recap - ASTY

Here is a daily chart of ASTY, an OTC POS, as of Sept. 12, 2014:

The daily chart shows ASTY has more than doubled off the consolidation in the $3s; however, it has now started to consolidate at these new levels. With this in mind, I was short biased, but I didn't have much conviction in the trade because of the new consolidation taking place.

Next I pulled up this fugly beast's intraday chart at around 2 pm that Friday:

As you can see, ASTY was starting to fade. I decided to look for a good entry knowing that overextended OTC POS stocks can experience serious panic once volume dries up and a major support level cracks. I wanted to short any bounce towards the previous resistance at $7.20. Unfortunately, it never came. Instead I watched ASTY fade even more and crack the low-of-day (LOD) at $6.90. Frustrated, I decided to short any pop into the close, and did get some short at $6.85.

My plan before making the trade was to set my stop at the day's major resistance at $7.30, and swing the short over the weekend in the hopes of a morning panic on Monday, with a price target of $6--covering half of the position here and letting the rest ride. Why did I think ASTY had the potential to morning panic on Monday? Because it's an OTC POS and because the last several days the stock had decent morning panics. Historical performance can be an indicator of future performance, or in this case, crappy future performance.

So come Monday there was no morning panic, and the stock up-trended all day. My stop was hit at $7.30 around lunch time. Honestly, I would have covered in the morning if I had noticed that ASTY wasn't panicking as I had predicted. However, I was tied up at work and didn't get a chance to check the price action.

So the trade didn't pan out, but here are my takeaways--i.e., turning this trade into a positive learning experience and not into negative self-ridicule that would inevitably cloud my future judgment and trading:
  1. Good daily chart but not exceptional, ASTY was consolidating, I want overextended stocks to short.
  2. Good observation regarding the pattern of morning panics.
  3. Used small size and risked a comfortable amount of money so my emotions weren't and will not be affected by this trade.
  4. Because my emotions weren't affected and are instead very calm, I'm able to analyze this trade thoroughly, rationally, and more importantly, accurately.
  5. During my analysis, I noticed the words "Frustrated, I decided to short..." The word 'frustrated' is an indication that I was not in the right state of mind--a calm and rational one--just before entering the trade. A wrong state of mind leads to faulty judgments and bad trades. I need to get better in the future at recognizing this emotion creeping in just before entering a trade because it likely is affecting my perception of the ticker and my risk/reward probabilities.
'Till next time,


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