Trading for Dummies, Q&A #70 & #71

Netflix, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Thursday, November 6?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Thursday, November 6?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Down. You'd be looking short.
3) Short at 53.36 on a sell stop below the 10:30 inside bar.
4) Initial Protective Stop: 55.24. (max. 3.52%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could cover half, carry half, or just close it all at once.

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I came into the day thinking that the CSCO news would be exploited by sellers and I should be concentrating on the short side. This was wrong, but it's the way I was thinking early on.

NFLX gapped down and formed an inside bar at 10:30 that could be executed against. The initial stop was wide at 3.52% meaning I could only short a fairly small 250 share position. The stock closed at $50.94 for a gain of 4.54% from entry giving an unsatisfactory reward to risk ratio of 1.25 : 1.

It would have been wise to move the stop down to the noon swing high at $54.20 cutting the risk down to around 1.5% (but I spent the afternoon reading Elmore Leonard's Tishomingo Blues instead of watching the market).

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GoAmerica, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Thursday, November 6?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Thursday, November 6?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Up. You'd be looking long.
3) Long at 0.49 on a buy stop above the noon bar.
4) Initial Protective Stop: 0.45. (max. 8.16%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could cover half, carry half, or just close it all at once.

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I didn't trade GOAM though everyone and his grandma was in there (GOAM did 33,000+ trades on the day). I was too busy fighting the broad market trend by shorting NFLX. In any event, GOAM was a no-brainer off the noon bar after it coiled tighter and tighter throughout the morning, forming a classic "pennant" formation.

I was preoccupied with trying to capture 5% in NFLX while this thing popped 75% from an obvious entry. You can see from my "Intraday Sentiment" chart below that the buyers were in control of the broad market nearly all day, and especially in the afternoon. Ya gotta keep your eye on the ball.

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Screen capture of my intraday Watch List:

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