I told my editor "I've got a trade. It's COCO." She looked at it and said "I don't see it." I looked at it, and said, "I don't either. Maybe that's the wrong symbol. I'll check." Just now, I went back to my list, and the stock after COCO - I knew it was after COCO - was the trade, symbol COOL. Funny symbols!
Anyway, the block pattern bottom in June is unmistakeable. Now we're just waiting for a return to the block. The simple version of the rule for buying (see the long, difficult previous post) is, buy at the top of the block pattern, but in this case, I don't think that's right. The block pattern consists of two bottoms and a top, there in the middle of June. Then, the two bottoms each consist of a short bars. The second bottom, in particular, contains a cluster of two short bars, in a point type arrangement. See if you can guess what that means. It means, here, two short bars, and the second one, shorter, and "enclosed". See if you can guess what "enclosed" means. Really, the buy price is the high of the second, shorter bar. Then your stop is just (meaning both "just a little" and "simply") below the whole bottom complex.
It's definitely strange that a pattern like this could be an opportunity to double or triple an investment in a few short weeks, but this is a "classic" pattern. I think it's "high probability". And it has a stop built in, so the probability of a severe loss is low - though it's not an impossibility. On that latter point, it probably is not a good idea to put all your trading money in one of these trades. The best thing is to keep enough in reserve for several trades. Even that doesn't apply to everyone. I wrote about the importance of placing, let's say, large enough trades. I mean, I'm drifting into complicated thinking, here, but, if this trade works out, you can make a little money with a $100 investment. But a $100 investment increases your risk, because of commissions. If you get stopped out, most of your loss in a $100 trade will be commissions. In the case of a $1000 investment, you will loose a small percent (if the stop works) from selling for less than you paid, plus a similarly small amount from commissions. In the case of a $100 investment, if you get stopped out (if the stop works), you will loose a small percent from selling lower, and a much bigger percent from commissions. The stop stops making so much sense. It might be better to just buy $100 worth and hope for the best. But, if you want to buy $1000 worth, you should definitely use a stop. So now, let's say you only have $1000 for trading. You could put $100 in this, at 1.75, say, and then hope for the best, and keep the rest of your trading money for other opportunities, and just forget the stop. It's a cool pattern. You should be fine. Or, you could just go for it, with your entire $1000, and use a stop. Now, it has to be said, stops aren't 100% reliable. You could get stopped out at a bad price, and loose a big chunk of your investment. The stock could even stop trading, and you could loose your whole investment. I don't think COOL, here, is going to do either of those things, because of the strong pattern, and the way it overall trades steadily and actively, but it could happen. Having said all that, I leave the decision to you.
Where do you want to sell this? One of two things is likely to happen. The first is a top at the June high, at 2.80, maybe, and then another dip, and the other is a move straight through 2.80, which would likely carry to 4, or 5. It would be nice to hold on for a price of $4, $5, if it's going there straight away. It could even blast through 4 and 5, and go straight to some higher price still, though that's pretty unlikely. On the other hand, if you don't sell at $2.40, and then it goes down, all the way to your stop, maybe, you won't be happy. You'll wish you had sold at $2.40. Ditto if it turns at 4 or 5. So, how do we deal with this? The thing to do is watch it very closely when it approaches one of these key prices. Maybe there will be no hint, in the short term action, that a top is forming. Then we could hold off on selling. We can even wait just a little for a top to be "signaled", in the short term action, and then, as I also described in the previous post, sell somewhat below the top.
That's all I'll say for now. I need to work out how to document different kinds of things within the structure of a blog. One kind of thing is these writeups. The charts on these pages (available courtesy of Finviz.com) are "fixed" charts. They will always show these patterns I'm commenting on. But I can also put "dynamic" charts in posts, charts that will update, every time you load a post. I'm trying to figure out how to create sections of the blog you can go to to look at updating charts of our open trades, and our developing trades, and also a section for documenting "closed" trades. The blog was originally conceived of as a place to follow trades, or to follow stocks. You should be able to go to a section of the blog and review the latest charts for lists of stocks.
The blog now extends "back" from this post to a number of posts that describe the system, including this example of a trade, and the previous post, the APP post, which sort of describes a trade, too, then Use Limit Orders, which is an important post, and then the introduction to the system, in three somewhat muddled posts, and then, earlier still, a lot of stuff which is kind of obsolete now - though, if you go all the way back to January, 2014, there are a bunch of updating charts to look at. That's the beginning. From here, going forward, I think I'm going to focus on creating updating sections. If you just "read the blog", the updating sections will probably look like just a mess of posts. But the next post, I think, will be a list of updating charts, and there'll be some information about how the sections develop from there.
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