10.02.2022
Stay the course. Take Profit.
Tighten Stops.
Key Takeaways
Our downside objective in TLT, the 2013 low, was hit for a realized gain of $7.71 per share. This trade is closed.
Our thesis of CE continuing lower to test $83 has not been invalidated. We have an unrealized profit of $10.59 per share on the remaining half of our position. We have lowered our stop again. It is now below our entry price.
Our thesis of BAX continuing lower to test $49.50 has not been invalidated. We have an unrealized profit of $4.03 per share on the remaining 1/3 of our position. We have lowered our stop again.
Trade Management
TLT
On September 3rd, we analyzed the ETF TLT and took a small position.
With our trade showing a profit, on September 11th, we tightened our buy-stop ahead of the FOMC press conference.
On September 26th, we tightened our stop again to $109.25.
The next day, on Tuesday the 27th, price gapped lower and plunged right into our target of $101.17, the 2013 low. See the chart below. Since this was, frankly, a low-conviction trade, the buy-limit order to close the entire position at the target was set with the entry.
Here is the the daily chart. The red vertical line is our entry. The green is our exit. The orange horizontal lines show the buy-stop continually being lowered. We were filled to-open at $108.88 on 09/06 and filled to-close on 09/27 at $101.17. That is a realized profit of $7.71 per share.
TLT Daily. Click to enlarge.
CE
On September 18th, we published Two Potential S&P 500 Short Ideas. These ideas were generated from a relatively complex scan of the S&P500. The scan searched for stocks trending lower with a rally into a declining 20-day moving average.
We entered short with a market order at the open on 09/19. Our fill price was $100.93. Price then spent the entire week falling. Price closed Friday with a hammer-like candle on a gap down. That and the precipitous 2-week drop caused us to take profits on half of our position and tighten our stop to $108 for a realized a gain of $9.93 per share. Last week, price went sideways. Based on the daily and weekly charts, our thesis of lower prices remains intact. Price closed at $90.34, leaving us an unrealized profit of $10.59 per share on half of our position. Now we have tightened our buy-stop to $98 which is above an open gap, which if tested will potentially act as resistance, and below our entry price
CE Daily. Click to enlarge.
CE Weekly. Click to enlarge.
BAX
From that same September 18th publication, Two Potential S&P 500 Short Ideas, we entered short on BAX. We were filled on a market order to-open on 09/19 at $57.89. Price tumbled during week 1. We left our stop unchanged and took off 2/3rds of our position for a realized gain of of $2.48 per share. Last week, BAX opened lower and went sideways to down. With an unrealized gain of $4.03 per share and an intact downtrend thesis, we have lowered our buy-stop to $59.75.
BAX Daily. Click to enlarge.
BAX Weekly. Click to enlarge.
Conclusion
Our open short trades are going well. We have collected profit on 1/2 to 2/3rd of our initial positions in both and lowered our stops to reasonable levels. We are preparing for some mean reversion where the plan will become to add back to our positions as price approaches key levels and tells us to.
As always, thank you for reading. This article is for educational and informational purposes only. The author may or may not have a position in the securities mentioned. Read our full disclaimer here. Please reach out with any feedback or comments. I would love to know if you agree, disagree, or don't care at all. Louis@eastcoastcharts.com
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