Trading for Dummies, Q&A #85

Lincare Holdings, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, November 21?
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 Friday, November 21?
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 35.78 on a sell stop below the 10:30 up bar.
4) Initial Protective Stop: 36.36. (max. 1.62%)
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.

..........

Sentiment was mixed which is usually the case on expiration Fridays as the market is guided into port.

LNCR gapped down and saw an unusual amount of trading (30,000+ trades on the day) so it was an obvious stock to watch. The 10:30 up bar provided a nice spot to get short beneath with very little initial risk, and 800 shares was a good size to sell.

I followed my trading buddy Steve's suggestion to get in the habit of at least lowering the protective stop once my initial risk is covered. After the 11:00 bar I moved the stop to $36.07, which is not something I usually do.

The stock closed at $33 for a gain of 7.77% from entry giving a reward / risk ratio of nearly 5 to 1 from the initial stop (and nearly 10 to 1 from the lowered stop).

It's good to have a trading buddy who can point out how you can improve. Steve and I never discuss the market or individual trades, but offer each other general support, some motivation... that's what's important.

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