Trading Week Ending 12/26/08

As mentioned in my previous/first post, my capital for trading has diminished greatly due to other investments and travel/missions. I am, however, trading extremely cautiously with an account I jointly oversee at Think or Swim. My future brother-in-law (also an experienced missionary) and I are using this account to both learn necessary skills needed to consistently trade profitably (a feat in which over 90% are said to have never achieved) and slowly add to it's bottom line.


Below, I've added charts and screenshots of the aforementioned Think or Swim account in order to illustrate this past week's trades (Sensitive account information has been intentionally left out). If you're unfamiliar with Think or Swim, I highly recommend checking out their website (I've always gotten great customer service from them, as well as reserves for hard to borrow stocks). This first screenshot details trade history (parameters set for 7 days). You'll notice the dates and times of the trades to the left, as well as the executed trade price on the right.



Below is a screenshot of a 5 minute chart for HSNI (a stock I was alerted to by both Timothy Sykes and Muddy over at Green on the Screen and Darkside Trading). My rationale for the initial short: HSNI had multiple up days in a row, and imo will inevitably fall back down to 'normal' price levels. The morning spike to 6.62ish had been the highest of the current run, so I was shorting with the prediction that, given the fading mid-day volume, HSNI would be unable to breakout passed that price. Did I short early and without confirmation? The simple answer is yes. I did have a mental stop-loss in place should my theory be proved wrong and the stock climb to make a new high. My prediction proved to be correct, and I decided to hold overnight as the stock failed to rise above my entry price late in the day (which would mark the 2nd retest of the day's/current run's high). HSNI had a nice drop most of the short trading day (which I would have covered into had I had more than 200 shares in play). I decided when the stock began to rally before close. Friday's volume was fairly unimpressive, and Tuesday's triple top gave a pretty firm ceiling for the stock to break through, so I decided to re-short after the morning spike had started to wane. I held over the weekend, wanting to see an identical drop as in the Tues.- Wed. price action. With the fading volume and failure of HSNI to make new highs after several attempts, this stock 'should' react accordingly. Knowing that stocks can pretty much do whatever they want, my mental stop-loss is in place. I'm already in the money at this point with HSNI, so barring a huge gap-up, I should be able to cover tomorrow. Again, I probably would have covered when the morning spike fell close to 6.20 if I was trading more shares.

This chart from Yahoo finance details the same time frame for HSNI as the one above, but shows the volume, clearly defined dates (both are also on the TOS chart but it would have made the image unnecessarily large) and is accessible by anyone with an internet connection. It would, however, be virtually impossible to trade using Yahoo charts because of the 10 minute or so time delay.

Below is the actual profit/loss information from the modest Think or Swim account. I've listed the top ten gainers of the last year to demonstrate the validity of shorting penny stocks that have run too far, too fast (a strategy I first learned from Timothy Sykes). It's no coincidence that 7 out of the top ten fit this description (the other three- MMM, FRE, and BBY aren't penny stocks and I probably shouldn't have been trading them in the first place). The bottom of my P/L list is made up of similar 'Big Board' stocks, and to my detriment carry larger losses than the top ten gainers- valuable lessons are all they gave me.