Post feedLVS and the "Happy Dance"
Apparently LVS had a little more gas in it's tank. I have received only a handful of e-mails that expressed appreciation or excitement about the profits being made, while as of now I have probably received at least 100 e-mails asking things like...
An interesting comment came out on the Q&A last night. As we looked at LVS, which broke it's resistance at $78, and was trading at $79 and some change. The "Is it too late" question surfaced, and I had the opportunity to talk about breakouts, and how typically the stock will retrace to old support. With the price sitting about a buck and a half away from support would you have risked a buck and a half on this trade to see it move higher? Essentially this is what your risk is. If the stock closed below support today, I would have taken the beating and went about my business.
"Is it too late?"
"Would you trade this?"
"Has it moved too much?"
"Any Comments?"
Of course I do not have any problems with questions like this, but I hope the individuals asking them realize that as you ask these questions, you want to try and develop more specific rules to your repertoire that answer these questions for you.
An interesting comment came out on the Q&A last night. As we looked at LVS, which broke it's resistance at $78, and was trading at $79 and some change. The "Is it too late" question surfaced, and I had the opportunity to talk about breakouts, and how typically the stock will retrace to old support. With the price sitting about a buck and a half away from support would you have risked a buck and a half on this trade to see it move higher? Essentially this is what your risk is. If the stock closed below support today, I would have taken the beating and went about my business. The risk involved was well worth the reward. Now with the stock sitting at $83 and knowing it could possibly come down to $78, your risk is now $5. Depending on how much higher you think LVS will go, would it be worth taking this risk?
Odds are it will eventually revisit $78, and just like the CTSH trade, if you are interested in the longer term trend this stock will make, you have to be willing to sacrifice this potential pull back. Let me reiterate Van Tharps quote I used last night...
"the ironic part of system design is if you want to maximize profits, you must be willing to give back a great deal of the profits you have already accumulated. You can't make money if you're not willing to lose. "
I have a "thing" for Homer Simpson pictures lately. Sorry.
Posted by
Option Addict |
11/09/2006 01:51:00 PM
Anyone,
I know that Oil stocks have happy feet but Look at DVN it basically is doing the same thing as LVS. broke its prior with convection. So what do you think of that stock? The stock has been going up the past month. And look at Crude oil it has finally broke and close above its 30 day moving average? Would anyone make this trade?
Posted by
Anonymous |
11/09/2006 02:04:00 PM
Jeff,
I have a related question to your quote that you have to be willing to give up profits to make substantial profits.
If you set your target according to the price pattern, and your stock has a straight shot up to your target and begins to show weakness, isn't it good sense to sell at the target and wait for a consolidation/flag/retest to enter an additional position?
Huge gains are nice and we all love them, but i have found that many times that target is the high water mark for quite some time.
Examples today are RIMM, DO, HOG and ESV. All 4 of those hit my breakout targets. Could they continue their ascents tomorrow or Monday and make me look stupid? Sure, but if you don't take profits at your target, then over time, isn't your risk/reward analysis skewed?
There are usually multiple chances along a stock's rise to get in, but at a stock's top, there's only 1 chance to get out with your estimated profits.
Posted by
Anonymous |
11/09/2006 03:22:00 PM
That Van Tharpe quote is so appropriate today for me - I have to remind myself next time a day like today happens. Today was the hardest day of my two weeks of real-life trading as I watched my profits soar then within 15 minutes pull way back in the last two hours of the day so much that I closed 50% lower than what I closed with yesterday and was stopped out of one trade, a trade that I had just 15 minutes earlier raised my stop loss to protect "profits", which after commission and the options spread made it a loser. I thought I was resistant to the emotion that comes with trading but today I learned that is not true... oh man.
Posted by
Anonymous |
11/09/2006 04:15:00 PM
Brett...
Of course that is the case. If your stock turns back towards support before hitting your target though, this is when that comment comes in to play. Like you and I have discussed many times, you have to be willing to stomach the re-test in order to hit the target. To do this, you will give back some unrealized gains in the process. It's all part of the process.
Happy Trading
Posted by
Option Addict |
11/09/2006 04:19:00 PM
Jeff,
Thanks for the training to focus on what's important, "your system". I too cringed as Rimm retraced and erased a 500 profit on only one contract. On LVS I turned around and tightened up my stops and just kept trading. Today was my best day in the market after a horrible time last week.
Thanks again,
Brian K
Posted by
Anonymous |
11/09/2006 08:23:00 PM
I'm doing the happy dance, but wandering when to stop dancing. What I mean is: I don't find it easy to set a target for stocks with a steep trend. I can set an arbitrary target but.........
Posted by
Anonymous |
11/10/2006 09:51:00 AM
What you can do with LVS is look for weakness to sell, perhaps a negative candle. I missed this breakout, but i'm looking for an opportunity to get in via a flag or pennant consolidation. Remember, not many stocks continue straight up, so be prepared for some kind of retracement.
Posted by
Anonymous |
11/10/2006 10:05:00 AM