Trading off MOS 2nd offering price 5/20/2011

5/31/2011 Update: Sold another 1/4 at 71.98 +6.88, leaving a tracker with stop under 69. 72 again proved to be a big level for MOS.

MOS has been under pressure and became the lagger in the Ag sector due to the Cargill overhang. On 5/19 afterhours, they announced the pricing of the secondary offering. Many stocks would see the relief once the offering is priced. I see that a lot in smaller companies where they would drop to the offering price and hold. Sometimes it would require a small base (2-3 days) and start going up again.

MOS was in play and it was on top of my list on 5/20.

May 19, 2011 /PRNewswire/ -- The Mosaic Company (NYSE: MOS) announced today that a secondary offering (the "offering") of 100 million shares of its common stock, related to Cargill, Incorporated's exchange of its approximately 64 percent interest in Mosaic with Cargill stockholders and certain debt holders, has priced at a public offering price of$65 per share.

I was expecting it to consolidate at the open and get a good ORB break up. That did not happen. It actually drove down fast with volume to 65, the secondary pricing. I was watching the stock to see if it actually reverse off the 65 level. Reversals off secondary pricing level is usually a great r/r trade and it has tendency to drift upwards. I entered long at 65.1 once the 5min bar reversal happened and simply placed a stop at 64.84. My first target is filling the gap at 66.24 (r/r of 4.38:1). My final swing target is 71.85/72 (see daily chart) for a r/r of 26R.

I sold 1/3 of my position when it filled the gap at 66.20 +1.1. I held the rest with the original stop at 64.84.

I sold another 1/3 on Friday at 70.28 (+5.18) when it is approaching the gap from 5/11. My stop now is under 68. I am still looking to sell MOS around 72.

This is an A+ setup - "in play" off news, good 2nd offering price pivot and very liquid stock with tendency to consistent multi-day moves.

Thought #1: Secondary pricing levels gives a pivot. I would not swing with nearly the size if it is a normal overshoot into big support play.

Thought #2: When MOS cleared 66.50 on 5/23 gave a nice daytrade setup into the close.

Thought #3: maybe MOS has bottomed and will make a higher low. That level could be 69. How should I play this? Buy into a pullback reversal off that level? Can 72 be taken out? 72 was a 4 month support level and 200D is around that level. The 50d is still curving down and will meet at 72 in a week or so.

- Chris

Trade Recap PLAB 5/26

PLAB on 5/26. This stock was on my post earnings drift list and has retested trendline, looking for bull flag to break up. It was on my list on 5/26 because PLAB saw quick reversal from 9D moving average on daily. On 30min chart, I find 9.34 being a level that the stock has failed many times.

My 9.30 alert hit at the open and it held again. I came back to it 15min later and saw it trying to do a bull flag under the 9.34 level. When it breaks out, I got in at 9.35 over opening high with stop under 9.23. The intraday target is retest of 9.6 (high from 5/18) - r/r of 1.67 with 10 as first swing target - r/r of 4.3. It surged with volume to 9.41 and stalled. I was stopped out at 9.21 the stock dropped fast back under the breakout area. The stock then bounced off the 5DMA and resumed higher to 9.6.

thoughts #1: I micromanaged the trade when its a lower vol stock. It should be a swing with stop under 8.75 (60c risk and 1.25 reward or more). I need to stay away from trading low volume stocks under 10 intraday. They are just not consistent enough to give me consistently good expected value plays. What I would do different now is... just swing this and let it prove me wrong and bull flag fails.

thoughts #2: This is still very constructive on daily and 30min timeframe. The stock tested 30c and 5DMA on Friday 5/27 and held so far. The 30min is showing a C&H pattern that can push higher to 10 and above.

- Chris

Trade Recap PPO 5/25-5/26

PPO was a simple bounce off trendline and 20D play. This is a stock that I played mutliple times and on my core list. I would not be involved in this trade if I did not think SPY is going to rally for rest of day.

I bought 65.70 when it cleared previous day's consolidation with stop at 65, intraday target is 67, 67.75-68 and swing target is 70. r/r of 2:1 to 7:1. My plan was ride it till I change my view of SPY or PPO loses uptrend. I would not carry this overnight if I did not take some profit intraday and has cushion.

I sold 1/2 at 67.95 when it reaches my target of 68 around end of day for 2.25 (about 3.2R). I then moved the stop for remaining share to under 67. Next day, market opened weak and PPO dropped 67, I was stopped out at 66.92 at the open for +1.22 (1.7R).

thoughts #1: never had the volume on the bounce. I did not love the bounce without the volume and I did not have the right swing stop. I was the weak hand. I was too greedy when it was not an A trade to me. I still struggle on expecting swing targets to be hit when I do not want to hold through big retracements.

thoughts #2: if I intend to swing this, I would need the stop to be around breakeven or remain at 65.

- Chris

Trade Recap VHC 5/27/2011

VHC was in play due to a broker upgrade premarket:

VirnetX Holding Corp (NYSE:VHC): Initiating with Outperform; See significant Upside - Cowen

http://notablecalls.blogspot.com/2011/05/virnetx-holding-corp-nysevhc-initiating.html

Premarket showed that 24.60 was a level that VHC failed to break through.

• Bias is to long over 24.60 with a good r/r entry.
• Upside potential is around 25.5 then 26 based on 30min chart and descending trendline on daily chart.

a - opening drive

• Looking for an opening drive with stop under 60c. Got long at 70c with stop below 60c. The target on this trade is 25.50 for a r/r of 5:1 or 6:1. I expected slippage on this volatile stock. I was stopped out 10min later for a loss of 17c.
• I saw 25 has become a big level and I need to try again if it takes out that level.
• Thoughts: I would take this trade again, but not sure in this kind of volatile stock. Could be better to wait for 10-15min to let them settle down and spreads to tighten.

b/c - base and break

• VHC regained 60c, 5EMA has caught up and supporting the stock, long 1 tier over vwap at 24.87 with intention to add over 25, worst case stop is below 47c. Target is 25.5 to 26 with r/r of 2:1 or 3:1 (not great).
• A few minutes later, VHC took out 25 with volume, I added at 25.05 with stop under 89c. Target is still 25.5-26 with r/r of 3:1 to 6:1.
• After the breakout, I moved the stop on my first tier to 89c, so around breakeven.
• Stock ran up nicely to 25.5 and couldn't get through. I saw buyers coming in at 25-30c. I was looking for the 9EMA to catch up. If it close under the 9EMA, I would just hit out of the stock.
• Around 10:55, 9EMA caught up and pushed the stock over 25.50, but I saw the volume has been slowing. That's my first warning sign.
• Stock struggled at 25.90, then it lifted to 94c and immediately came back down.
• This is very close to my target and I sold half my shares at 90c for a gain of $1.03.
• Moved my stop on rest to under 50c.
• Then the stock did a bear flag and dropped 50c HARD. I was then stopped out with a huge slippage at 25.25 for a gain of 20c. Was not happy with that slippage.
• Total gain of $1.23 with about 50c risk taken.
• Thought #1: I would take this trade again, but be more aggressive in selling into my targets. When my final target of 26 is 10c away and my risk at that point is under 25.50 (40c risk) and in a very volatile crappy stock like VHC. I need to take it out and call it a nice trade.
• Thought #2: I could sell into 50c and get back in when 50c lifts, but I dont like the chances of 3 push attempts. I could also buy more at the consolidation under 50c, and hit out under 25c. This probably should only be done on better acting stocks that wont see massive slippage.
• Thought #3: the momo add over 25 is an A trade, I needed more size, so I can take a 3R gain at 50c.

Lots I can improve, more size so I can be less greedy and take profits at 50c and 90c. With current size, taking profit at 50c is not really worth the effort despite being the right thing to do. When my reward is 5:1 with a good probability setup, I need to take more size to sell into pops.

- Chris

Mid-day fade trades Part II

Here's part 2 of the mid-day fade trade: (see part I here)

- The trade did not work, but it gave me 2 important piece of information that provided me an edge for a breakout trade later in the day. (love paying little for information!)

Trade 2: LVS - 8/12/10

-30 min chart showing levels to watch are 28, 28.07 (resistance) and 28.40 (gap fill)

- 5 min chart showing 3 push pattern into resistance mid-day

- rallies are needing more time to rest

- after entry, stock was getting well bid around 27.75... did not drop together with market and showing relative strength intraday

- stopped out 27.88 on a lowered stop as stock is holding 20EMA (-1c)

- the trade was busted, but it gave me 2 pieces of information

- LVS was a leader intraday showing relative strength and has become candidate for breakout for eod push

- LVS has bids at 27.75

I kept tracking LVS, it made another move over 28, but stopped at 28.07 resistance around 1pm. Since its still mid-day and market was not trending, it did not fit my criteria for buying a breakout.

Then 2:55pm comes around (into eod where breakout trades have a higher probability of working), market was firming up, LVS pushed through 28.07. I bought the breakout at 28.08 w/ stop at 20ema and target of 28.40. (see chart below for details)

If anyone is reading this, let me know your thoughts on this trade.

-Chris

Mid-day fade trades Part I

Today I tested 2 what I call "mid-day fade trade". The current "mid-day fade trade" criteria (constantly refining) are:

Trade type: Intraday scalp

Thesis:

1. stocks get push into resistance early in the session has a lower probability to break out in the mid-day slow choppy trading environment
2. some stocks can be faded at resistance level when buyer failed to lift stock above important resistance level
3. looking to profit from trapped momentum-based bulls losing patience and exiting their positions

Setup:

1. stock must make a sizable non-news driven rally from the open and run into resistance in a 30min/ daily time frame
2. Time of day - rally into 10:30am to 1:30pm
3. Non-trending day - market did not just take out major level, prefer emotional larger candles in the indices on the intraday 5min charts, tick and a/d are mixed
4. looking for 3-push patterns with declining volume and increased frequency (stock needs to breathe more frequently)

Entry/ Stop/ Target:

1. enter on 2B reversals/ failed breakout from resistance levels on 5 min charts
2. price stop: above high of day
3. time stop: 3pm if its not working
4. target - vwap (1st target)/ opening price/ prior intraday support
5. risk/reward is >2x

Other thoughts:
- prefer stock in downtrend on daily chart


Trade 1: NUE - 8/12/2010

- 30min chart showing 38.75 as resistance


- 5min chart showing 3-push pattern, breaking intraday uptrend line mid-day
- stock moved quickly to test vwap and prior support


comments: need to add as trendline is broken

Part II will cover a failed mid-day fade trade that gave important information on the stock I was trading.