Monday, February 2, 2009

A Trade In FAZ

I was going to start this post with a bold assertion along the lines of, "I milked this trade much like a perverted farmer might go at the teats on a cow."

However, you see that big run after 1pm? I totally missed that. It was a big miss, and I was humbled yet again by Mother Market.





Anyway, I caught the morning trade pretty damn good, so I'll talk about that.

It didn't start well. I woke up, wiped some sleep from my eyes and turned on my screens. FAZ was trading over $49 pre open. There was an HCPG level at $48. Not knowing about the market news that was to drop at 8:30 (Trader A would ask, "How come you never know what's going on?") I put in a bid at $48.10, hoping the $48 level would be support on a pullback.

At 8:30 when the news came out, my limit was hit and the stock immediately plummeted 4 points from my entry. How's that for a nice welcome to the trading day? It seemed bad, but in a way, it alerted me to the fact that FAZ had some good support at $44, or at least recent congestion. So I added to the position at good levels and by the time the open rolled around, I was basically back to flat on the day with only 100 shares remaining.

FAZ opened for regular trade and pushed higher before pulling back down toward the $44 level, where I added a couple hundred more shares at around 9:40.

Why was I added to this position? I had 3 reasons. First, I felt I was adding in a fairly safe area due to the recent congestion around the $44 level. Second, the HCPG level up at $48 was close enough (and I was bearish enough) that I felt it might act as a magnet. Third, and this is what really caused me to stay with this trade was the fact that on a 60-min graph, the downtrend line aligned nearly perfectly with $48.

So I felt there was a double magnet pulling the stock higher, and decent enough support just below my entry.

I'm not going to bore you with all the entry and exit details, but that was my thinking for the trade. Miraculously, it worked out according to plan and I did a solid job of exiting. I purchased again when it pulled back to the $48 level and made another nice, though smaller, trade.

I felt great.

Of course, then I moved the solid move in the afternoon, barely, and nearly lost my mind. But that's trading for you... you're a genius one moment, and a complete idiot the next. At least that's how it is for me.

12 comments:

Anonymous said...

The gap fill this morning was a no brainer.

Anonymous said...

A lay-up, if you will.

Dinosaur Trader said...

Did you play it via FAS long?

-DT

Anonymous said...

no, I played via an obscure ETF known as SPY.

Anonymous said...

and frankly, those leveraged ETFs are for the gays.

Dinosaur Trader said...

Ah, when you said gap fill, I thought you were referring to the extremely gay, FAZ.

Well, your gap is now filled. Crude is popping off here, which makes me think we're going to retest the highs in SPY. For me, the situation here is murky. I'm flat.

-DT

Anonymous said...

Agree.

mdawsz said...

BTW, me above...sometimes easier hitting anon than going through the whole rigamarole of logging in etc etc.

Dinosaur Trader said...

I actually figured. Sounded like you.

-DT

mdawsz said...

HEY! Remember that guy little2rich? ...looks like someone hacked his blogger password!

btotten said...

THANKS FOR THE BLOG. ENJOY READING. IN THE DAILY REPORT ARE THE TRADERS REAL TRADERS THAT MAKE UP THE PL'S?? WHO ARE THESE CATS

Dinosaur Trader said...

Yes, real traders. I work with them.

-DT