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HAS trade

July 25, 2008

The evening of the 23rd I placed an order to buy HAS Sep. 35 calls contingent to the stock being at 40.27, the high of that day, or above. Yesterday, Thursday the 24th, it triggered and bought at a price of $6.10.

On the daily chart, HAS looks perilously close to turning over and falling back from this resistance, but it looked also very plausible that the stock would surge higher if the market had a strong day. To my eyes, HAS broke through the recent resistance at 40, though the lack of major volume was noteworthy even if above average for that day and the previous few. The volume moving up into and also after the earnings was stronger to the upside than the previous downswing from the 39 area resistance to support just under 34.

Target of 44.70 Order set to sell half and give the other half the chance to go further.

Stop sell (contingent order) below $38.15 (just below the low of the “breakout” day).

For the trigger to buy, I chose the high of the previous day instead of adding on .10 or .15 somewhat arbitrarily. As it turned out, the high on today’s spinning top was .21 higher than the high of the “breakout” day. Fishing for stops?

On one hand, a spinning top perched on top of the an upswing like this one and just barely above the resistance is not such a great sign. But despite the day’s hesitation, it still shows some strength while closing up on a day that the SPX was down 2%. A spinning top is also not a reversal sign in itself. Needs a close lower to round out the signal for likely reversal.

The toys group also appears to be gathering strength as it has moved from red to yellow to green on the Big Chart. The chart for HAS remains very strong looking on the weekly chart, particularly considering the recent weakness in the markets.

7/28 – UPDATE:  Contigent order triggered – Sold at the market for a fill of $4.30. Loss within alloted risk allowance.  I feel okay about this trade, though it is a loss.  It was triggered by a contingent order to open and I would probably not have made the trade were I there to read the market and see the weak swing upward on that particular day it filled.  I feel good about making the effort to embrace using mechanical orders for entry and exit and for laying out a reasonable rational and plan for the trade.  The market just happened to disagree with me at this moment.  It is not a high probability trade considering the market is in a longer term bearish posture.  But even if the “breakout” was not on overwhelming volume and perhaps a touch extended, I think that the market rallying (’til that day) from what could be a potential bottom and the Toys group showing relative strength made it a decent trade to take a shot on.

Trade and learn.

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