So how do I know how to determine when a stock is liquid enough? for one thing, they must trade >1M shares per day. BUT there is obviously more than that. A spread that is >0.50 between bid and ask is a problem. These two stocks suffered that problem too.
My account is still in good standing, but I have to admit that I have been taking some blows lately. Still, the goal of limiting losses and letting profits ride on has payed off in the long run. In the last few days, I have learn that it pays to be patient and that you are better off waiting for "the perfect" trade. Patience, perseverance and discipline are hard to keep in mind!
7 comments:
Juan,
Have you seen SGR today? I mentioned it early Thursday morning, it shot up today. I re-entered RHAT and did a BP Call trade for the retracement.
I thought I will do SGR today. I was one day too late, as you will see. Wait for the possible retracement next week.
As I said, there was a double bottom at the 50% retracement line.
Wait until you see the whites of their eyes, before shooting!!! Similar to waiting for waiting for the perfect trade. What about trading smaller amounts and more trades from now on?
As a risk management exercise it would be better. I am currently in 8 trades, with 60% of my account still in cash.
Ideally I would like to get to the position where I am in 12 to 15 trades with 40% to 25% cash. Then I would not be so bothered about a trade going awry.
Next week I shall try to start a new approach to commenting on the trades each and every day. I can do this while your asleep, as I am 8 hours ahaed of you. At the end of the trading day you write a round up. The others all join in too suggesting trades.
I assume HK is in Hong Kong, Varun in the US, as well as accountholder. Then there are those just watching too, who might spot something.
Some thoughts on the future.
Take a look at SNDK. It jumped 22% today on strong earning. Made multiyear high with very promising future potential.
Here is a quote from Bear Stearns analyst,
"We expect SanDisk to benefit from continued strength in demand, driven by the rapid and continual emergence of new applications, a steep cost reduction curve for 2006, and its enviable IP portfolio and royalty income growth," Kalra said. "We expect the re-rating process by the Street to continue, as we believe that the growth story remains underappreciated by the Street and has yet to be fully priced in."
HK
I want your honest opinion about this trade, and help me make a desicion about SNDK.
I have been trading SNDK since it triggered my system back in January
http://www.pathometrix.com/SNDK.html
Today, I exited a CRC I have been trading since June, due to the excessive run up. BUT I think I am still bullish on it. I also exited a PCCRC on AAPL and another one on GOOG for the same reason. Now I have this 3 stocks that are driven by momentum, but that may have some potential still, then again, they may ran out of gas....
What would you do: CRC's on each? the gaps on each one of them this morning may actually be exhaustion gaps.
HINT: If you have Platinum look at each stock's IV for the last 2 years and the IV/SV ratio.
Fortitude
I am happy that you are following SGR and keep us informed, as a validation of the system. Although not everyone turns out as expected, I know that the trigger was the first step for high fliers of today like AAPL, SNDK, and DNA among others.
ARRS
http://biz.yahoo.com/prnews/051012/clw087.html?.v=13
Earnings report on the 27th Oct 05, which is possibly favourable.
Juan, it came out of your 200% Vol and 5% minimum price rise.
Juan,
I see your concern. I am not too familiar with exhaustion gap and the use of IV/SV but here is my attempt.
I think the current uncertainty in both the individual stocks and the market average would favour a PCCRC trade over a CRC.
For SNDK, the IV has peaked and is falling. Long term IV is at its high end. However the IV/SV ratio is only 0.36 (for 7-149 IV and 6 day SV) implying that the options are supercheap. There is an anomaly here. The 6 days SV is at 141%, therefore I don't think the IV/SV can be relied on at this time.
Looking at the weekly chart, in 2003 SNDK climbed strongly up from $9 to peak at $43. Using the principle of symmetry, I applied the same $34 range to the $23.5 low of last July and got $57.5 which is not far above Friday's high of $56.5. Another good reason to suspect that the gap may be an exhaustion one.
Since the longer term options are still not cheap and there is chance that the current gap may be an exhaustion gap, my preference is to wait for an opportune time to get into a PCCRC trade.
As for AAPL, the low IV/SV is also due to the high SV which is falling however the longer term IV at 40% is not too high to enter a trade. It looks like the shorter term IV may fall further therefore can be a good time to enter a PCCRC.
GOOG - IV/SV same anomaly but long term IV of 33% is very near 2 years low of 32%. Like AAPL the short term IV may fall further and can also be a good time for a PCCRC.
Excellent, HK, you made my discussion for me, only I might not have said it so well.
I have entered a PCCRC on AAPL on friday. BTW, my local Apple store was incredibly busy this weekend!
I suspect that GOOG and SNDK will behave like RHAT in the days to weeks to come. As the stocks move sideways, the volatility will decrease, then you will have the opportunity to enter PCCRC's. Remember, entering a PCCRC during a high volatility period can really kill you, so just wait a little.
I will post on my AAPL PCCRC and we shall follow it, OK?
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