Hi freeus,
Sorry it took so long to get back to you. Wanted to give this some thought first.
Monday morning quarterbacking is much easier than the real thing of course. Still, I think there's some things worth considering. Certainly, it is an excellent idea for future reference to systematically review past trades, and consider what went right, and what went wrong. Otherwise, you tend to just keep making the same mistakes......that's the voice of experience, BTW, having done just that! <:-o
It looks like you pretty much nailed the entry in MVK at 13 1/2. I'm guessing that your entry was about 12/5. At that time, there were nothing but buy signals, of course. But also, the stock had been in a downtrend which began in late May, and was trading below all its moving averages, and these were downsloping. So at that time, MVK really had an uphill battle on its hands.
askresearch.com
But, as it turned out, MVK right away started handling that battle with strength. After reaching what turned out to be a bottom on 12/1, MVK tested and convincingly broke overhead resistance at 14 on 12/6, then tested and broke overhead resistance at both 14 1/2 and about 16 1/4 the very next day, demonstrating excellent follow-through, and making a tall, white, very bullish candle in the process. MVK then spent the next 6 sessions consolidating these gains, and in the process demonstrated clear technical sell signals from an overbought condition.
askresearch.com
During these sessions, the 10 and 20 day ema's had crossed bullishly and were now upsloping. MVK corrected sideways to meet these rising moving averages, but the 50 day ema was still overhead, and still downsloping. In fact, MVK tested the still-declining 50 day ema on 12/13 and again on 12/14, failing with bearish looking candles. So, at this point, you'd still have to conclude that MVK was in a downtrend, and was thus far giving no indication that it would proceed further up. It must have been at this point that you sold. I would agree that this was a good point to sell, with clear chart and technical evidence for selling.
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[ Actually, I very likely would have sold on Monday or Tuesday of that week at roughly the same price, for four reasons:
1) The stock was weakening technically, with OBV and Williams %R showing early sell signals as they began to curve downwards; Williams at this time was extremely overbought at a level less than 10.
2) The 5-3-3 stochastic was in extreme overbought territory also, and starting to hook downward (and in fact the 5-3-3 stochastic gave a strong crossover sell signal on 12/13 or 12/14).
3) The candles formed on Friday 12/8 and Monday 12/11 had shadows above the real bodies, suggesting a reversal. The inverted hammer/hanging man candle formed on 12/11 is also most consistent with a reversal/correction to the downside here.
4) With an entry at 13 1/2, and the stock closing on Monday at 16 7/8, you already had a 25% gain. (Certainly, nobody would have called you stupid had you locked in 25% profit here, or sold half the position and placed a stop under the other half at least; see below.) ]
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Regardless of these sell signals, the next Monday (12/18) nevertheless saw the re-appearance of strong technical buy signals. But a very, very significant event occurred here also: MVK tested the 50 day ema for the third time, and this time broke through convincingly---on about twice normal volume, forming another tall white very bullish candle. These moving averages then started sloping upwards, and MVK was now in a short-term uptrend (though still a long-term downtrend, as evidence by the 100 and 200 day ema's overhead). This would have been the clear signal to re-enter. MVK then went on to test the 100 day and 200 day successfully, and it is now trading above these, and they are roughly horizontal. So, MVK is in a sideways trading range at the moment, perhaps consolidating before resuming the uptrend. There is now just a small possibility that the stock will fail here (see below). Because the 50 and 100 day ema's are upsloping, the more likely scenario is a continued uptrend, but it is still too soon to tell. A sideways trading range/basing period is also entirely possible, though I think less likely.
askresearch.com
Where to from here for MVK?
Well, now the stock has formed an uptrend line, and is trading above all its moving averages. You can now draw a trend line from the reversal candle on 12/1 upwards along the bottoms of the low points in the uptrend. This line will just about intersect the 200 day ema or maybe just above it, at about 23 or 23 1/2. So, this trendline and the 200 day ema would represent critical support, IMHO. Also, the stock has formed an ascending triangle formation, with the hypotenuse forming the above-mentioned trendline, and the base extenting horizontally left to right at 24 1/2. This would represent critical resistance, IMHO. It also represents old chart resistance/support from October, August, and July. Either way, MVK is very close to a significant test.
Most often, for a stock in an uptrend, ascending triangles are resolved to the upside, and are particularly buyable if the breakout above the triangle base is on strong volume. But, it is possible (but less likely) that the stock will fail at the apex of this triangle, and correct down below the trendline/triangle hypotenuse. If this occurs on strong volume, it will very likely continue, and will not reverse and go on to breakout to the upside. The bottom line is that, while the anticipated breakout would be to the upside, a resolution of the formation is imminent, and whichever way it breaks if the volume is very strong at that point, the stock is very likely to continue in the direction of the breakout for an extended period.
It is difficult to say which way MVK might break. The technicals show weakening right now, but that is to be expected during a consolidation phase. The candles look somewhat bullish, with shadows below the real bodies, but as yet are equivocal. Nevertheless, the bias in breakout direction is clearly to the upside at this point, unless and until MVK fails at critical support.
On the 30 minute intraday chart, the 200 minute ema has provided fairly good support lately:
askresearch.com
Chart support here is just below this point, at 23 1/2, where you can see the lower shadows of the candles touching. If I were long MVK here, I would therefore set my stop just below this, at 23 3/8. If my stop were hit, that would mean that MVK failed at both candle and moving average support, and would most likely go on to break to the downside and begin a downtrend, especially if this occurred on very strong volume. If the stop were just gunned, and MVK closed below these supports on low volume, I would look to re-enter above 24 1/2, particularly if MVK closed above this point on strong volume with a bullish candle. This scenario would be most consistent with an upside breakout out of the ascending triangle. You could also wait for confirmation with another close or two above this point on strong volume; you would miss some of the upside, but this conservative approach would be more prudent, in the event that MVK ended up just entering a trading range out of the triangle formation, in which case it would be expected to close above and below these key levels periodically.
Bottom line going forward with MVK is that there is substantial potential for an upside breakout from the ascending triangle formation, but that the stock should be watched carefully in the less likely event that the breakout is to the downside. If MVK enters a trading range phase, it should continue to be watched for a breakout one way or the other on high volume, and bought/sold short accordingly.
What did you do wrong with your MVK trade?
Well, first of all, to me lost profits are far, far, more preferable to outright losses. A bird in the hand, you know. I think it somewhat dangerous to pine after missed profits, because it will tend to make you "see" potential missed profits from here on out, which in turn will keep you hanging on to stock you should sell. And that is one of the most common mistakes made, even by seasoned traders IMHO, and something which must always be battled against. How many times have you lost because you broke your own rules?
IMHO, from a technical standpoint, you did not make any mistake at all by exiting when you did. You played the best probabilities, I'd say. If you showed me 100 charts like MVK, then I'd guess that probably 85 of them would go on to fail at just the point that you exited. So, was this really a mistake? If you think so, and hang on the next 100 times, then you'll be dead wrong perhaps 85% of the time, and the 15% of the time you are right will be small----and very expensive----consolation.
The only "mistake" you made was not re-entering when the chart and the technicals told you to.
That said, I think it just as important to have an exit plan as to have a disciplined, objective entrance strategy. I don't know if you have one or not, but if you did have a clear and well thought out exit plan, and stuck to it, then you are to be congratulated, regardless of what the stock subsequently did.
If not, then you might consider establishing one.
There are many possibilities, and I think you have to find one that suits your style and temperment. The main thing is to have one, stick to it no matter what, and always be open to ideas of improving its accuracy.
Before I enter a trade, I try to have three things in place: an entry point, an initial stop, and an exit point. Unfortunately, I don't always follow them, and almost always pay the price! FWIW, my exit strategy is somewhat dependent on the particular stock, and the exchange. I'm not saying this is perfect; certainly it can be improved. But it is important to have some type of written down plan. Mine is always not too invariant from the following:
1. I set an initial stop 1/8 below the prior day's low, or 5% away from the entry, whichever is less.
2. If I am stopped out, I immediately move on to something else.
3. If I am not stopped out, and the stock goes the way I hoped, raise my stop to 1/8 below the prior day's low, or the breakeven point, but never more than 5% below my entry.
4) I try to adjust my stop to the breakeven point as soon as possible, that is as soon as the support levels allow.
5. I look for at least a partial exit at the first significant overhead resistance. Whether my exit here is partial or complete depends on how strong the technicals, chart, candles, and volume look, and also the history of the stock as it has tested this resistance on previous attempts.
6. If the stock looks very strong, I'll just keep adjusting my stop up below each previous day's low (but again, never more than 5% away from my entry).
7. If the stock shows any signs of weakening, but I think there's a reasonable chance for consolidation before further gains, I'll sell half the position, and put a break-even stop under the other half. That way, you are guaranteed a profit, except in the comparatively unlikely chance of a big gap down, and strong subsequent selloff.
I very much like the idea of taking incremental profits in a disciplined, preset manner. There are many variations on this idea, of course. You will find that this will invariably mean that sometimes you will miss out on further profits, but most often these "further profits" will not materialize any time soon if ever, so in the meantime you're left either hanging on to a position which is losing for you, or at best sitting on dead money which could have been working elsewhere for you getting incremental profits.
I think the bottom line is to establish for yourself a disciplined entry, stop, and exit strategy----and stick to it. Never modify the plan in the middle of a trade, since it will almost always be either greed or fear which motivates you to do so, and either one is a recipe for disaster nine times out of ten. And if you change your plan in mid-trade and it ends up being the "right" thing to do that time, that is even worse, because it only encourages you to do so again in the future, and changing your plan mid-trade will cause you to be wrong far more often than you are right.
That's not to say that your plan should never be altered. Just don't do it in the middle of a trade. Reflect later (as you are doing now with MVK), when you are out of the position, so neither greed nor fear can adversely color your assessments and judgement. Then, you might consider "paper trading" your revised strategy for a while, to satisfy yourself that it either represents an improvement, or it does not.
Hope this helps. Please keep in mind that this is just my take on things. I'd be very interested in Reid's comments here as well, so feel free to ask him, of course.
Regards,
Walkingshadow |
