Friday, November 16, 2007

Excerpt from this weekend's newsletter

The best opportunity of the day came as a long with FSLR base and break towards 200 (mentioned in Thursday newsletter). FSLR gave a lot of hints before she took off that she was going to run: she was acting strong all morning, never giving up her gap even when the Nasdaq started getting hit after the open. One of the reasons we love FSLR so much as a trading stock is because she telegraphs her moves so well before-hand.

Ideal entry was on the base and break lift-off with volume from 194 with fills around 195 or up to even 195.5 (with a 1 point or less stop -- at this point she either had to go immediately or would have been sold-off).

Another reason you should have been stalking FSLR before the break-out was the 2 day chart. Our readers know that we always have an intraday chart (1 day/3 min), 2 day chart (5 min), 10 day chart (30 min or 60 min), and daily chart open on each stock (they are linked so as you change one ticker, they all change over to the new ticker).

Notice how FSLR gapped up but stopped just under the previous day's high. A gap-up and basing under the previous day's high, with a daily number above and good volume and relative strength all constitute the stock communicating to you her intentions of wanting to make a serious run. We actually made a mistake in her because we were too eager. We were so sure about FSLR making a run that we bought her early before the breakout (193.5) and were later stopped out. It wasn't too smart but at least the second time we were patient and bought her on the base and break. This is a common mistake -- when one really wants in a stock one often jumps the gun. Instead (and here we are also repeating the lesson to ourselves) be patient and wait for the set-up.

Overall November has been a tricky trading environment for our type of trading, as it often is with trend changes. Most likely things will get easier as the market settles down and picks a direction, be it up or down.