My approach is the following:
1. Set a stop loss at a pull back of >50% of every rally. In the case of AMLN, the high early this morning was $28.79. The bottom of the rally was yesterday's low of $21.55. Thus, my fibonacci retracement of 50% is about $25. I have entered a contingency order to close the position if the stock price falls to $24.95. With every new rally, I'll use the same method to find a new point for a contingency order.
2. Buy back short calls at the low strike price ($22.5 in this case) and sell equal number of next month ATM calls. This should increase my bet on the position. I would only do that IF the stock price retraces less than 50% of the rally. I will use as indicator that the pull back is over, something like the stochastics in the 60 min or daily charts.
Here is the chart of the Fibonacci ratios in the 60 min chart:
The account is doing well today, here is the account at the opening:
I immediately changed my contingency order:
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By the way, I am still looking at RRGB and DE as possible candidates, they have not pull back enough yet. I am also looking for anything that may fit my system. RIMM looks like a good candidate, but because the story has been developing for a while, the appropriate trade for that would be a PCRCC, not a CRC. I am interested in stocks that, like AMLN, jumped after a long-term correction.
2 comments:
First of all let me thank you for taking on this challenge. I always admire people who do this with live trades.
AMLN: Comments
There has been a 27.68% increase in stock value in one day. I can undertand if the increase was gradual. But since this is a gap increase wouldn't you get out.
TECHNICAL
I too believe the stock is bullish. However there is
Support 25.43
Resistance 30.07
FUNDAMENTAL
With the positive information on postitive drug test there is some room for rally.
Fundamentally speaking, You will see that my choices will have strong catalyst that may influence the price of the stock for months to come. I am looking for big winners. Finding a cure for diabetes is one of the biggest challenges of health care today. If AMLN succeeds, it may do very well. This is why I suggest patience and discipline on choosing candidates.
Technically speaking, If AMLN breaks support, then it will trigger my stop loss, contingency order. I don't feel bad about it, because my contingency order yesterday was at about $19.05. I am bullish too, but I have reduced the money at risk significantly. IF the stock goes sideways, my front month will lose value, helping to control the decrease of value in my long calls. If the stock continues to go up, I will continue to grow my account, that is the objective.
Let me show you another trade I suggested no long ago:
http://pathometrix.com/DNA.html
Finally, I will be posting Elliott wave counts in the weeks to come. Your comments are great. I hope others will contribute too, so that we can all learn from the experience.
We will be trading with stop loss contingency orders. This will help us with the discipline of trading. It is hard to see a stock rally AFTER you sold, but it is easier if you know you followed a preconceived plan
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