Friday Morning - FSLR ... up close

Gator's Chart of the Day: FSLR

I've been tracking this trade all week and I'm not stopping now.  In fact, today I am going to zoom in and take a closer look as the trade is well underway. 

Note the buy signal (green arrow) on the stochastic that occurred on 11/20.  This was an early clue that the stock was ready to move.  I didn't actually get in until early on 11/26 and sold 90% of my position about 2:30 on the 27th.  I got back in and have maintained at least a core position since Monday of this week.

The trade is getting a bit long in the tooth now and I am looking for it to pause and probably retrace from just short of 35.  That could be as soon as this afternoon or early next week.  The stock is now in what Fitz called the "money maker" pattern.  The price just keeps riding the upper Bollinger band.  So far it is doing that on the outside and that really can't last much longer.  With that in mind I have changed my stop strategy.  In order to stay in as long as I can I will use the previous day's low as my stop.  If the stock continues to go up I'll keep raising the red bar.

Seattle Chipmunk at the Space Needle Party

Alvin partying in Seattle

Last night, well it was actually very early this morning ... just after midnight when it became legal in Seattle to hold up to an ounce of your favorite wacky terbacky, Alvin was hittin' the pipe. 

Dude, that's some righteous weed.   Jeff Spicoli

Averaging down

Otherwise known as the Lenny Dykstra School of Trading.  He learned it from Cramer.  ‘Nuff said.

Raise your hand if you’ve ever done this.

Good, I see that everybody has at least one hand up, including me.  Been there, done that, got the scars to prove it.

One of the best rules of trading is “never add to a losing position”.  The best thing to do when you find yourself in a hole is quit digging.

However, (there’s always a “however” in trading) .. there is a right way to go about averaging down.  The right way starts with a plan.  The plan starts with a maximum allowed loss amount.

Let’s say that you want to buy XYZ at 20, with a maximum loss of $200.  You could

Buy 200 shr with a stop at 19 ($200 risk)
or
Buy 100 shr with a stop at 18 ($200 risk again)

Assume you take 100 at 20, stop at 18.  Stock goes against you to 19.  You still like XYZ.  You could take another 100 at 19.

But your stop now has to be raised to 18.50 to maintain your original $200 max risk amount.

100 at 20 + 100 at 19 = 19.50 average cost

$200 risk / 200 shr = $1 stop loss = (19.50 - 1.00) = 18.50

That is the only disciplined way to average down.  You have to have an “uncle” point and you must respect it.  You really don’t want to be a Lenny do you ?