Trade Recap - GALT
So yesterday, Sept. 12, 2014, I was watching a few overextended stocks and a few beat stocks that may bounce soon. Then I saw this tweet:
After a quick glance at the daily chart for GALT, I noticed the stock was beat, but recently started an uptrend. Moreover, the stock was nearing a breakout at ~$6.60.
Next, I took a quick glance at the intraday chart and noticed a strong chart that already was nearing $6.60 when I first glanced at it. I think I pulled up GALT at around 3:15 pm and at ~$6.40.
So I missed the intraday high-of-day breakout at ~$6.30, and the multi-day breakout at $6.60 was fast approaching. However, I don't buy breakouts, I buy pullbacks after a breakout, or pullbacks just before a breakout with good risk--i.e. solid support within .20-.50 cents of my entry. So I began to plan what a good trade meant for my style of trading.
First, if GALT broke out past $6.60, I would buy the first dip and risk on $6.60 or $6.40, depending on the dip entry price. If $6.60 topped, I would buy a dip to $6.20, and anticipate the breakout of $6.60, with a $7 magnet, and with risk set at $6.10.
As you can see in the above intraday chart, GALT failed at $6.60, pulled back, and I entered at $6.40. I made this decision because I thought $6.40 might hold and the uptrend might continue. So I decided on using a position size half of what I planned originally. This kept my risk about the same as my original plan. If it didn't hold, I would go full size at $6.20, with a risk that I was totally comfortable with.
GALT did pull back and I added at $6.20. Then it traded sideways for several minutes before pulling to $6. Consequently, I stopped out as planned at $6.10.
So in hindsight, I'm still very happy with this trade. The daily chart was beat but up-trending, it was nearing a breakout, probably had shorts in it, Fridays tend to have short covering into the cose, $7 magnet, and news hit.
A couple factors probably hurt GALT in the end though. The news was crap, SPY was down .60%, GALT was already up 20% at one point, and chasers with weak hands probably didn't want to hold over the weekend. There was a nice bounce into the close, but rules are rules. A good and successful trader must be rule governed, period. At least that's what I've learned.
Anyway, a final thought. A good trade is not always one in which I make money. A good trade is when I follow my rules, no matter the result. A losing trade can be analyzed and dissected to determine the likely cause. But that shouldn't be done in real-time. Sticking to rules and a plan set before entering the trade keeps my emotions in check, and lays bare the efficacy of my trading methodology. I'll let the chips fall where there may, and let the market tell me what I should tweak next time.
'Till next time,
Jory
$GALT moving on 8k, In discusssions with Large Pharmaceutical companies, pg 23 http://t.co/TWgj8554aV
— Blink (@BlinkX90) September 12, 2014
After a quick glance at the daily chart for GALT, I noticed the stock was beat, but recently started an uptrend. Moreover, the stock was nearing a breakout at ~$6.60.
Next, I took a quick glance at the intraday chart and noticed a strong chart that already was nearing $6.60 when I first glanced at it. I think I pulled up GALT at around 3:15 pm and at ~$6.40.
So I missed the intraday high-of-day breakout at ~$6.30, and the multi-day breakout at $6.60 was fast approaching. However, I don't buy breakouts, I buy pullbacks after a breakout, or pullbacks just before a breakout with good risk--i.e. solid support within .20-.50 cents of my entry. So I began to plan what a good trade meant for my style of trading.
First, if GALT broke out past $6.60, I would buy the first dip and risk on $6.60 or $6.40, depending on the dip entry price. If $6.60 topped, I would buy a dip to $6.20, and anticipate the breakout of $6.60, with a $7 magnet, and with risk set at $6.10.
As you can see in the above intraday chart, GALT failed at $6.60, pulled back, and I entered at $6.40. I made this decision because I thought $6.40 might hold and the uptrend might continue. So I decided on using a position size half of what I planned originally. This kept my risk about the same as my original plan. If it didn't hold, I would go full size at $6.20, with a risk that I was totally comfortable with.
GALT did pull back and I added at $6.20. Then it traded sideways for several minutes before pulling to $6. Consequently, I stopped out as planned at $6.10.
So in hindsight, I'm still very happy with this trade. The daily chart was beat but up-trending, it was nearing a breakout, probably had shorts in it, Fridays tend to have short covering into the cose, $7 magnet, and news hit.
A couple factors probably hurt GALT in the end though. The news was crap, SPY was down .60%, GALT was already up 20% at one point, and chasers with weak hands probably didn't want to hold over the weekend. There was a nice bounce into the close, but rules are rules. A good and successful trader must be rule governed, period. At least that's what I've learned.
Anyway, a final thought. A good trade is not always one in which I make money. A good trade is when I follow my rules, no matter the result. A losing trade can be analyzed and dissected to determine the likely cause. But that shouldn't be done in real-time. Sticking to rules and a plan set before entering the trade keeps my emotions in check, and lays bare the efficacy of my trading methodology. I'll let the chips fall where there may, and let the market tell me what I should tweak next time.
'Till next time,
Jory
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