Why Buying Breakouts Is Never As Easy As It Seems
Posted by timothysykes on Mon 11th of Feb, 2008 05:03:56 PM
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TIM $15,138, Up $137, Learn From This Well Executed Trade
Check out my take on financial stocks in my latest AOL Article
As I stress in my badass surprisingly well-received 6-hour instructional DVD cum 220-page instruction manual and autographed book package (what is this word self promotion?), I only to want buy stocks breaking out. Now this is a very general term, so thankfully my trade today on teenage stock (YTEC) trade exemplifies EXACTLY what I mean—when I bought my 300 shares late morning at $18.28, it was an intraday, 3-day, 5-day, a 5-month breakout (over October’s highs) and aside from one brief spike last Friday, represents a new all-time high. So you have breakouts on several time frames—which are sure to pop up on a ton of traders’ technical screens—and some nice trading volume that made all that goodness happen. I was immediately proven right as for the first 10 minutes of the trade; I was up between 10-25 cents/share with even more trading volume. When somebody asked me why I bought at such a strange price (especially late morning—usually never!), I posted this comment:
“and that intraday high was a 5day breakout (save for that one spike), which was also an all-time high. one of these days one of these spikes is gonna stick and some of the 130k shorts will cover, causing a real spike over $19”
Within another 10 minutes, that’s EXACTLY what happened. The price rose gradually to the $18.75 area and then all of a sudden, somebody put in a 20k buy order at market (probly a panicking short) and pushed the price up to $19.30 within seconds. The only mistake I made was taking a long-term (1-2 days) outlook and wasn’t prepared to sell into such a quick spike—after all, when I wrote about YTEC in this article I said I didn’t want to buy until a close over $18, which hadn’t happened yet. (I simply jumped in because sometimes stocks don’t wait for everything to go as planned, you gotta think on your feet.) But, while I was bummed I didn’t catch anything over $19, I thought I’d get another crack at it later in the day—after all, like APWR, I was gunning for $20! But within minutes some big sell blocks appeared on the ask and the bids started to weaken so I said screw it, give me my 50 cents/share (after all, it’s tough to hold late morning spikes and the stock had lost $1 from its spike in the same EXACT pattern last Friday, so I wasn’t about to take any chances). I sold 300 shares at $18.77, a decent $137ish gain.
Good thing because as you can see from the chart below, the stock tanked $1+, 50 cents below my original entry, in the next half hour before rebounding slightly (closed over $18, but I don’t buy into weak closes). This is why I hate buying breakouts; they just are never as simple as shorting, at least for me for some reason.
Perfect entry + decent exit=well executed trade, no matter that the quickness and small profit were def. not what I expected.
TIM Lesson: When a stock doesn’t act EXACTLY according to plan, exit quickly, especially if you have any profits
Ironically, out the 3 teenage stocks I featured yesterday, YTEC performed the worst. But, I don’t feel any regret not playing (VNUS) or (CCC), neither had the near perfect YTEC-like variables to make them high probability setups.
(NYNY) surged 80% on this mid-day news. Love it or hate it, I don’t play news movers—too many varying expectations/opinions makes my price action analysis highly unreliable. Likewise, I ignored (SUF) because they won a contract and I prefer to short fluff—like the IDMI trade the other day (which was a good bounce play this morning, but moved too quick for me to catch it)
Almost bought another breakout play before the market close, (ORCT). Compare its chart to YTEC and you’ll see that $9.20 is a big multi-day/multi-month breakout. One last round of research helped me realize they’re reporting earnings tomorrow morning. No, thank you! I don’t play the earnings guessing game, especially on stocks that have doubled off their lows in the past few weeks.
Missed the solid close on (APWR) due to my ORCT research, probly a nice gapper, but it needs volume to really breakout
PS Please stop freaking out about my library—still porting over lots of stuff…and also pleaseeeee stop emailing me questions on individual stocks, I’m so far behind, my answers will be dated. Much easier for me to respond on the comments section under each post and that helps others too!
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TIM Trades
View All| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| Nov 19 | AENY | $2.80 | $3.02 | $1148 |
| Nov 18 | NLST | $4.16 | $4.40 | $947 |
| Nov 18 | IMGG | $1.42 | $1.64 | $2094 |
| Nov 17 | NLST | $5.04 | $5.59 | $2195 |
| Nov 13 | VRMLQ | $21.50 | $22.97 | $2901 |
| Nov 11 | EONC | $2.61 | $2.80 | $687 |
| Nov 10 | EONC | $2.74 | $3.36 | $9784 |
| Nov 6 | QXM | $4.31 | $4.80 | $1936 |
| Nov 4 | COT | $8.66 | $8.88 | $642 |
| Nov 4 | QXM | $4.61 | $4.89 | $822 |
| Oct 30 | DDRX | $25.70 | $26.53 | $812 |
| Oct 29 | CTDC | $4.00 | $4.42 | $781 |
| Oct 26 | AWSL | $3.24 | $4.10 | $2516 |
| Oct 23 | RODM | $5.27 | $5.23 | $301 |
| Oct 22 | AMLM | $2.69 | $2.97 | $820 |
| Oct 22 | USEG | $6.12 | $6.09 | $85 |
| Oct 20 | CBOU | $8.93 | $9.06 | $243 |
| Oct 16 | VRMLQ | $16.79 | $18.65 | $2773 |
| Oct 13 | YONG | $11.05 | $11.66 | $1202 |
| Oct 13 | NPHC | $0.59 | $0.71 | $583 |
| Oct 12 | IMGG | $0.60 | $0.70 | $682 |
| Oct 9 | ZAGG | $5.50 | $6.10 | $2380 |
| Oct 7 | GVBP | $0.03 | $0.27 | $702 |
| Oct 1 | NPHC | $0.70 | $0.85 | $1482 |
Total: $98,094 (681%)
