Monday, May 05, 2008

Trade: MDP

I am short 300 shares of MDP at $33.95. This is a bear flag setup. Volume and OBV stink (which is what I want for a short) and stochastics are overbought. There are a couple of good places to place a stop. The two I agonized over were the top of the breakdown bar or the recent pullback high. Feel free to leave a comment and let me know how you would manage a stop on this trade.

5 comments:

Stan said...

After evaluating some recent bad trades, I'm starting to use 2 stops frequently. The first stop is a relatively tight market order which immediately reduces my risk for a slight loss if the trade is not moving in my favor. The second is a bit looser, because I hate just as much as the next person to see a trade turn the other way right after my stop is hit. This has been happening alot in this volitile market. I'm trying soooo hard to be patient and wait until just before the close before making a decision on the other half of a position.

So for this trade, I'd probably set the first stop around the recent high, or about $34.50. But for the second stop I think I'd set it near $38, because if it gets near 37ish I'd bet that all those people who bought in March-April (where the stock traded in a range) would start selling to break even. I might even load up on some more around 37 (with a very tight stop) in anticipation of a break-even selloff, provided that the indicators were looking good.

Ronald said...

Paul,
Based on almost no experience and the fact that $2/share is all I would risk losing on this trade - I placed the stop at $36.00. What target did you choose?
Ron

kunal said...

This is a tricky one. There isnt a surefire placement for a stop like most trades.

I would use a stop around 36.00 which is the top of the trendline (using linear regression channel)above 36.00 would constitute a breakout (according to my other mentor Kirk report)

The Market Speculator said...

Yous guys all make good points. If I would have went with a large position size, I would place my stop above the recent pullback pivot. Since I went with just a little more than half my normal position size, I'll give it a little more wiggle room.

In fact, if we continue to see a low volume pullback to the breakout bar, I may even add more shares.

Ronald said...

Paul,
What target price would you set? My naive eye sees a couple resistance points at $32.30 on 4/30 and $30.50 on 4/24. Do those make sense? What would you choose and why?
Ron