Friday, April 29, 2016

Trend Trade – JDSU

by Chart Shark

Yesterday I made a few trades in the morning that didn’t quite work out.  It was looking like it might be a pretty crappy trading day, however, I managed to catch the trend trade that formed in JDSU, and by focusing on that trade, managed to turn the day into a rather profitable day trading endeavor.

As I said, the early morning was pretty rough.  I had a couple quick winning scalps, but also took some losses in a couple other stocks which all added up to about .8 of my daily risk limit (R) and the day had barely started.  I got chopped up pretty bad in AIG, which was my biggest loss of the day.  I did, however, finally catch some winners that I was going to ride for a bit.  By the time I started focusing on JDSU, I was just about breaking even on the day (including my unrealized gains).

Trend Trade

1 Minute JDSU Chart - Entires and exits marked and annotated

At about 10-10:15, I realized that JDSU was looking ripe for a nice trend trade, or a trade-to-hold.  My other stocks weren’t looking nearly as pretty, and I decided to really hammer this trade for maximum profits.  I entered some auto-stops on the other 2 positions, checking in, and shifting the stops as appropriate.  I then got to work on JDSU, expecting to add into strength as it went up.

After an initial late entry, followed by an auto-stop at breakeven, I jumped in at the next show of strength with a full position.  I set my stop as indicated in the pic above (behind the last support point), and let it ride.

Then, I got screwed by outside distractions, which really proves that trading is best done in a distraction-free environment.  I could have added two more full positions during this time, which would have significantly increased my gains.

I added 4 more times.  Every time this stock took a break, and then began to show strength again, I was back in, trading the trend.  I would keep the stop for the newly entered position fairly tight (last support point), while trailing the stop for the rest of the positions a bit looser.  You can see I entered the 5th position a bit later, and there appears to be an entry point if you’re only looking at the chart.  The tape wasn’t really showing strength here though, but it wasn’t showing weakness either – no reason to enter a new position, but no reason to exit the rest either.  After a few minutes of consolidation, in a nice little pendant pattern (which is a continuation pattern) it looked like some strength was reentering the stock.  That wasn’t the case though, and the price quickly broke down out of the pattern.  I exited that 5th position rather quickly.  A couple minutes later, as the tape and pattern began to look really weak, I exited the rest of the position.

Trend Trade - JDSU

Trend Trading JDSU - 5 Minute Chart

The stock ended up double-topping, and retracing a bit of the day’s gains.  I missed the double top entry because I don’t tend to enter new trades during the noon hour.  I tried to catch a piece a bit later, and took a loss.  I tried to short a second time, and grabbed a small gain.

Overall, the day turned out to be pretty profitable because I recognized how this stock was trading, and knew I could hammer it for some decent gains.  I also didn’t let my early losses get me down.  I can’t say I’m a robot, and trade entirely without emotion, but I realize that losing is part of the process, and I don’t let it affect my judgement or trading ability.  Anyway, I ended the day at about 3.8R (daily risk limit) – not too shabby.

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