There are a few reasons to be skeptical about this trade. It's always tough entering into a sector when the rest of the market is up and breadth levels are close to 2-1 to the upside. Also, today's price bar is long to the downside, which is not ideal. If volume had been extreme on this pullback, that would have been a dealbreaker. However, since volume is still lighter than the updays, I'm was willing to take a small feeler position.
8 comments:
Sorry, don't mean to be a wet blanket, but I definitely can't agree with you taking a long trade here, even a small one.
All the reasons you note for treating this trade with skepticism are valid. In addition, the whole Gold sector is pulling back, including your other trade FCX which you got into yesterday and is under substantial pressure today.
Finally, overall market conditions today (the market looks tired and ready for a pullback) warrant extra caution when placing long trades.
TC
Have you ever thought of maybe trading options on breakouts and breakout-pullback plays? Seems like an easy way to pull higher profits.
I don't like to partake in a strategy until I reach a high level of expertise. While I have a good understanding of options trading, I am by no means an expert.
I have tried trading a variety of options (DITM, ITM, OTM) in lieu of stocks and couldn't find a way to do it in a way that was as consistently profitable as my stock trading.
In the end I concluded the same thing as MS, which is find a simple strategy (or a few) that works, stick to what you know/are good at and you will be fine.
I only play options now if I have a strong opinion about where a stock will go following a known event (e.g. earnings) - risk/reward ratio is much better than taking a position in the underlying.
MS: I am curious how you fared with FCX and AEM yesterday. I know you mentioned your FCX stop was around 102.5 - are you still in this one?
I am not in either of these, but I do hope they will rally for you today.
TC
TC,
I am still holding both FCX and AEM. I did not have a fixed stop set, and luckily I was in a meeting when FCX dipped below $102.50.
Good for you, although I still don't like how these two are acting - another high open followed by reversals on both of them.
Unless they turn around and rally in the afternoon I will remain in disagreement with you about these trades...
I may be beating a dead horse here, but it's worth pointing out that I am in agreement with you that a pullback trading strategy is a very good, lower risk way to make money in stocks.
The fundamental difference in our approaches is when it comes to waiting for the right entry points. You don't seem to be afraid to buy the proverbial "falling knife", as long as it hits your entry point.
For me, I want each stock to prove to me that it's indeed done pulling back and ready to rally before I commit capital.
A good example from today is VRTX, which I will get in over 38.15, because it's bounced off solid support a couple of times and offers great risk/reward.
Anyway, sorry for the rant, I don't want you to think that I am a critic simply for the sake of being critical/contrarian.
Good luck.
TC
TC,
I trade both strategies, buying pullbacks while they pullback and also the waiting for confirmation play. Neither is fool proof. In my own experience, both are equally suseptible to losses as well as gains. Many times that confirmation you are looking for is merely a bounce off the support line that does not last.
Couldn't agree with you more there. Every strategy has limitations and situations where it doesn't work.
That's where risk/money management come into play.
I am happy FCX and AEM are coming your way.
Good luck.
TC
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