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Whipsawed

December 20, 2006
tags: , , , , ,

Sigh……

Ladies and gentlemen, I would so much have liked to have the first trade I show on this blog be a winner. A Gigantic winner! But, alas, “The Cost of Doing Business” has been paid.
ININ opened lower today and quickly darted down well past my stop order at 18.55 and triggered a market sell at 18.52 at 9:32 AM before pushing right back up to close near the high of the day’s range, though still down a touch below my designated support line of 19.13. Truthfully though, I’m of mixed emotion about it. If this support area holds, I’ll be forced to consider getting back into the trade having already lost on it once. If it breaks down, I’ll be glad to be out already. My loss was actually less than my designated risk allowance since I positioned a bit conservatively, rounding down in number of shares. It feels a lot like I got whipsawed out of a situation that is now destined to use this level as support from which to make the expected move higher. However, it’s strangely liberating to be out of a stock that is acting skittish. Let’s explore.
As we know, support and resistance levels are areas and not exact numbers. In fact, to call the support line at such an odd number like 19.13 is perhaps a bit silly to begin with. Speaking of silly, I had to laugh at myself for writing in the post about doing business “If not now, then maybe the moment for this stock to make its move is still just around the corner…” Hello!?!? Note to self: The stock just put in a high of a 300% gain for the past year.
In any case, the high volume day today gives a mixed message. Certainly that it closed lower and is potentially breaking support on high volume is a major red flag. But today’s candle also is a gigantic Hammer. Instead of the support line I proposed, if we were to use the closing daily highs for the resistance line (18.37) of the recent triangle, the stock actually closed above that support line today. An up day tomorrow would both confirm new support there and do it with some added strength of the hammer to back it up. This would be an ideal entry for a patient investor that chose to pass on the breakout day and waited for a test of new support.


Will I re-enter? Doubtful. I’ll remain open to the idea, but I’d want some real convincing. I’m not getting great feeling about the tech sector. The Nasdaq broke below its recent trend support and potential triangle. It hasn’t formed a lower low yet, but it’s certainly going sideways.

The $GSO Software Index is definitely moving sideways now. (ININ is a software company.)

And the mighty SOX seems to be sitting heavily on the 50 MA after faulty bounce and lower high. Not necessarily a good thing for the Nasdaq. Tomorrow is make or break.

Another noteworthy tidbit is the after market close news today that Interactive Intelligence CEO Sells Stock, but even with all the selling this guy did November, he still owns a huge number of shares. You can look that up in the “Insider Trading” link from the left column of the Corporate Snapshot page.

In other news, Gold has pulled back during December and today bounced off it’s 50 and 200 MA. This seems quite significant and looks like a no brainer on the chart(lightning strike me now). I’d imagine all the gold traders out there are seeing the same thing.
Here’s the GOX. (The XAU looks similar.)

I like AUY for a gold play. Here’s the bounce off new support after a big volume breakout. Based on the height of that 8 month channel, I figure a target of 16 is reasonable.

That’s all for today. Thanks for stopping in to read the blog.

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3 Comments leave one →
  1. Anonymous permalink
    December 21, 2006 5:33 am

    Don’t give up on ININ amigo. Be prepared to see this thing take off come Q4 earnings time. It is all over IBD and other journals are picking it up. The CEO selling is to allow institutions to get in since they’ve been shut out and is really due to his divorce forcing a large amount of selling. This is bad for him but fantastic for an investor. Many a liguidity problem has been solved by divorces.
    Also, just an observation on your trading style. I too used to get stopped out all the time intraday only to have the stock come roaring back to close well above my stop position. Over the years I have moved completely to a stop based on the days CLOSE not the intraday numbers. I have found this to exponentially increase my returns by keeping me in some more volatile stocks with the corresponding potential. Do with that tidbit what you may. Good Luck with your trading and I enjoyed your post.

  2. Matthew Curran permalink
    December 22, 2006 12:18 am

    Many thanks for your comment and contribution to the blog. I do think an adjustment is in order for the use of a stop, particularly in a volatile stock like this.
    Does your broker allow you to set stops that only trigger on end of day? Or do you use some kind of contingent order?
    I use Thinkorswim.

  3. Anonymous permalink
    December 29, 2006 2:36 pm

    Matthew,
    I use TDAmeritrade and it does allow me to set stops based on End of Day prices which is fantastic. Good luck and happy new year to you!

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