In my post, “10 Ways to Build a Better Watch List,” I discussed how you might spend your pre-market morning finding great stocks to trade. Amazon (AMZN) is on my core watch list, but if it wasn’t, it definitely would have come up on my radar using the criteria in that post.
There was news on Amazon (AMZN), which brought in a lot of volume (specifically buyers), which caused it to gap up. It was a domino effect that made AMZN ripe with trading opportunities. As you can see in the stock chart above, I’ve shown 2 trades on this one as well as a trade I might have made if I was paying attention like I should have been.
The first trade was cut short because I had some business to take care of away from my desk (check me out on Twitter for the specifics. TMI?) Another opportunity to enter came and went while I was distracted. I was either watching another stock or getting really into reading Stocktwits. I don’t recall which. I did end up entering a second trade eventually, and that trade went according to plan, though I may have held on to it a bit longer than I should have.
Amazon (AMZN) Trade 1
This one was a pretty easy entry. Amazon (AMZN) looked strong right out of the gate. After it paused and regrouped, I took an entry above the earlier established high. As I mentioned earlier, I was taken away from my desk, so I set my software up to exit my full position a couple pennies below the dollar. I had it exit the whole position because I wasn’t sure how long I was going to be away, nor what might happen while I was away. I also programmed a stop below 90.00. I returned to find my target order filled. Cool. But the market was strong, my stock was strong, and I could have played this trade much better.
Amazon (AMZN) entered a lull as shown on the chart at the top. Just after the lull there was a great entry opportunity. And as I mentioned above I was distracted and missed the re-entry. A combination of distractions caused me to miss out on an entire point of potential profits. That really shows that when you’re trading you need to focus focus focus.
Amazon (AMZN) Trade 2
So, as I was saying, the market was strong, AMZN was strong, and there was more money to be made. I regained my focus and looked for another entry.
I generally tend to pull back into a 5 minute chart after 10 am, but I entered this trade on the 1 minute chart. My approximate entry is shown on the chart at the top of this post. You can see how the volume faded, and the price dropped back to support at the whole dollar (92) & EMA(10). Once the stock started showing strength again I took an entry & switched to a 5 minute chart. My first Target was the next whole dollar at 93. Amazon (AMZN) blasted through that target pretty quickly with no problems at all. Easy money.
Considering the strength of the market, and the stock, I was taking this one as a longer term (for me, long term = hours instead of minutes) trend trade. This means I had no specific targets, just an exit rule. I would exit when the price broke the EMA (10). This may have cost me, since my solid target, had I aimed for one, would have been the next whole number at 94. That target would have been hit and I could have exited with 2 points profit on that portion of the trade. Instead, I held out for the EMA (10) break, and lost a little potential profit. Was this greed? Or ignorance? I really thought this one might keep going. I just didn’t see a reason to exit until that break. The market certainly didn’t quit at that point. Amazon (AMZN) made it back to 94 again, and actually poked a bit above its previous high, but didn’t continue to trend upwards as I’d thought it might. I can’t worry about it too much; it was still a profitable trade. Perhaps I’m just over-analyzing. The key here is that I planned the trade and traded the plan. Sometimes, though, I think I could be a little more nimble with my decisions and adjust according to conditions.
Today was a really easy day for day traders. There were so many stocks that trended upwards for various periods of time, and the money was practically falling into our laps. And when the market trends, the statement “the trend is your friend” really holds true. There are times when it holds true within specific stocks, but when the market as a whole is trending, it is often a bad idea to try to be clever and fight the trend. Unless you were shorting McDonalds (MCD) today. Then you might have made a couple bucks.
So what do you think I did right in this trade? Or what did I do wrong? What might you have done differently? I imagine your system doesn’t have the same entry & exit requirements that mine does and I’d like to hear about it. Also, did you have any particularly awesome trades today? I know this is only one of several stocks I traded today that made a dollar or two. Anyway, let me know by leaving a comment.
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