A trifecta of bounces

This was certainly a week to remember. I scored a rare triple hit combo.

So many successful and profitable bounce plays. Where do I start? Maybe with the one that failed.

March 19

I was with my family at the airport waiting for our flight. I spotted MoneyGrowers plotting and saw the chart of MRC with the massive drop. I remembered the potential bounce areas since I finished reviewing earlier that morning and just placed some bids which were hit at the close. Boarded the plane feeling content even if it closed a little lower than my aep which was a little over 57 cents. Wasn't too bothered by it because only my initial tranches were hit.

March 20

The day started out bad since I had to cut my positions when MRC tanked in the early hours of the morning. On to the next stock on my watchlist then. 

NOW was number two on my watchlist since it was well into it's second consecutive 20% drop. 

Remember, massive drops = massive bounces. So at about 10am in the morning it hit my identified support areas. Darvas + Fibo 78.6.

I watched the support hold and started placing my tranch buys. The next 45 minutes went by quickly. The price held and was starting to creep upwards. By this time I was already at full allocation with both ports. 

This time, the waiting game begins. I wanted to see if it could clear the 50ma and hold above that maybe sometime after lunch. But the bulls were too strong and pushed it all the way over the 50ma and into a nice green candle by lunchtime. 

This prompted me to believe that this was a good ODR play. I only needed to watch it until closing to make sure that 10 would hold. Why 10? It was a good round number and would make it easy to put a stop on it. Plus the fact that I already have a good profit if I sell there. In the afternoon session, 10 was broken but I was able to sell all my shares around that area. Not bad for a couple hours holding time. 

But wait, that day wasn't done yet!

I looked back at MRC but I already missed the optimal buying window so I had to go to the last stock on my watchlist. 

PXP. 

The drop wasn't as violent as NOW or MRC but it was behaving very well. At about 245pm, it was hovering over two support areas, the 100ma and the Fibo 78.6. 

Those two points stated above led me to believe that this could have found a recent bottom. I proceeded to set my initial tranches and even bought some more near the close. For these kinds of bounce plays, the key for me is to watch the opening the next day if there is strength. 

March 21

Unlike the day before, this day started out pretty promising. PXP made a gap up and seemed to be gathering some strength before making a push to break the 50ma. So far so good right? 

Then the price went bananas in the next 15 minutes. Buyup after buyup. As with NOW, I made a stop of 13. 

Same reasons, same concept. For me any sell above the price of 12 was already considered a bonus. And it was a pretty sizable bonus even if I didn't put it my whole allocation.

After these two massive trades, I was ready to call it a week. I did one final scan and was intrigued by another stock that was crashing big time. 

VUL.

This setup was actually a first for me since I've never traded it with actual money before. Just did paper trades and that's it. This was the reason for the lower allocation. So let's take a look at VUL. 

What made it special was that after it's massive move, it never made any significant bounce yet. That 3/8 candle was a fake and unfortunately trapped more people. It just kept breaking down from all the significant MAs. Now on this particular afternoon, it was making a small cute candle and it reminded me so much of the SSI trade of I think Zee last 11/17/15. Go check it out. You're back? Good. 

So I placed my orders and got it just before the close. Again, the wait for the next day's open begins. 

March 22

The open started strong enough. A small gap. Then before 10am it blasted all the way above 80 cents which was the over the high of the previous day. That just means that the bounce is well on it's way!

My initial target was the reverse Fibo 23.6 levels. But judging by the move and the board, it looked like it would have difficulty reaching that level. This was the reason for me to sell at the levels that I did. 

And this ends my short and detailed walk-through on my bounce trades this week. I'm sure some would ask if I felt remorse or regret that I sold at the levels I did since the prices still went up after my selling. I was happy with all my selling. Profit is still a profit. 

And bounce trades are very tricky, sometimes all it takes is just one person to do a sagasa sell and like a house of cards, everything will fall apart faster than the blink of an eye. 

Enter the Double Dragon: DD

This stock has always been on my cross-hairs ever since it's IPO, back in my pre-charting days. Only problem was my cyborg unit was never able to get any shares. Back then, because of my lack of knowledge on how to enter a winning trade, I could only watch as it moved from strength to consolidation to strength again.

Fast forward to the present, I am now better equipped with the tools and weapons to get into stocks like these. And here is a short breakdown of the trade I did.

3.2.2016

Having made a clear breakout from the all time high, I made my entry right at the breakout point.

Just adjusted my trail stops for each day and watched as the it made new highs every day. Once the stop was hit, I sold for a good profit. 

3.14.2016 (Round 2)

After consolidating at the highs for a couple days, it made another breakout and I struck again. But I was more cautious this time since my average was now higher. 

This time I didn't sell because of a trail stop but because I saw a doji candle at the top plus the fact that the psychological target of 40 seemed to be too hard to break. 

So I wasn't able to sell at the highest price but it was a good two rounds. It's still consolidating right now so who knows, maybe there could be a round 3. 

The Stock Market Games

For the majority of traders out there who do facebook analysis (FA) or tsismis analysis (TA), don't you notice that most of the time the recommendations are always of entry points? Where to buy, what price to bodega, buy below this price, etc. So specific so detailed. 

But what about the exit or target price? This is where it gets a bit murky. Usually it's in a vague out of this world target of anywhere from 50-1000% percent increase. Such juicy and jaw dropping figures. Now, who in their right mind would want to miss out on the opportunity of a lifetime? 

I'm a cash cow. Moo

No one right? Why give up your measly 3-5% profit for the promise of the ceiling or baggers? If it's on facebook or a hot tip from everybody's lovable idyut or playbook master then it must be good. Well earthlings, sorry to burst your bubble but you've just been played. Welcome to the wonderful game known as the stock market. 

My system has done countless comparisons to numerous other earth systems, from carnival rides to sports, and it has come up with one game show that seems to resemble the stock trading experience the most. The name itself is a good indicator of what everyone wishes their experience or goal is. It's none other than the game show: 

Everyone's goal

Fitting isn't it? Everybody is in the stock market to earn and try to look for a way to get out of the rat race. To live a better life free from the daily grind, the endless traffic, to have more time to spend with their family or for those working abroad, to be able to come home and BE with their loved ones. Such simple human goals but oh so difficult to achieve. Being able to buy and strike gold in a basura stock is the ultimate goal. But usually this is not the case. Similar to the game show, not everyone can do it. This is where having a sound exit strategy comes in. Let's break it down some more. 

1) The money tree represents the possible profit that anyone can earn from a certain stock. So tempting. All the stock has to do is to go up. Simple right? Enter the next part of the game. 

2) Of course, as in everything in life, nothing is ever simple. To reach each new level of profits, there would be questions to be asked. Questions that get harder the nearer it gets to the top. In the stock market, these questions are known as the resistances. These are the lines that a stock has to break in order for it to be a bagger or more. 

Sample of a chart with resistances

Knowing how to plot these resistances is vital since it will give you a heads up for the next part of the game. 

3) In the game show, the host sometimes asks the contestant if they are happy with their current winnings and they can walk away with what they have or if they want to continue answering the next question with a wrong answer leading to the contestant losing it all or just taking home a reduced amount. This concept in stocks is where traders either take profits or cut losses. 

For some traders, the tsupiteros, they will disregard the ultimate target price and just look at the resistances and set their selling there, happy in the thought that they were able to earn X% for that trade. 

Others will look at the target price and be blinded by it. Even if common sense tells them that the resistances might be too strong, they will hold on with all hope that it will be reached. And this is where most people fail. In the same way that not everyone in the game show can win, the same concepts can be applied. Managing your greed and knowing your limits or a stock's limits can be the difference of your trade from winning or losing. 

Now, one of the key differences between the aforementioned earth game show and the stock market is the fact that on the game show, you are only playing in a vacuum. It is just you and the host. But in the stock market, there are thousands of others who are playing the same game as you. All thinking how to earn and where to sell. Remember, in a game, there will always be winners and losers. Plan your trades. Set your exits. 

May the best man or robot win.

Strong Hands Syndrome

Over the past weeks, I noticed something peculiar with my trades. Most of them had gains initially but once I sold them they were either below or near my buying points. Looks like my system needs some calibration on sell points. I've coined a new phrase for it, "Strong Hands Syndrome"

I'm gonna wreck your profits!

This is the opposite of the event called "shaking out the weak hands". Weak hands usually sell at the first sign of weakness then is left watching or having to buy higher when the stock rallies again. 

Having strong hands syndrome could also mean that you are a little greedy or too optimistic in that the stock will just go through previous resistances. Sometimes selling while the stock is going up is a good strategy. Have to remember that not all stocks go to ceiling or two. 

This has reminded me of a colleague who always says the following quote: 

That is to remind us that we should not be too hopefool* or greedy. Taking profits is never bad. What is bad is when the supposedly paper profits turn into smaller profits or even losses instead when we wait too long. The challenge is finding the perfect balance of when to take profits and when to hold. Maybe a combination of the selling on resistances and holding till end of the day is needed. I've retrofitted my mainframe to practice selling on resistances but it is a hard one to code. I need to collect some more data and integrate into my system. 


* term came from the same colleague