Yesterday, I only traded NTI, because the company had received a n offer from WNR at a price that valued the company close to $27.5 to $30. The price of NTI however dipped at the open, when WNR also dipped. I bought this dip which was much overdone and then sold when the price came back to a normal pricing range in regards to the offer.
I could execute this trade because I have been trading NTI, which was on my watchlist.
I will buy if the price falls again below $25.5.
CELG is doing fine and I raised the stop above the entry price.
As of now, the Portfolio has only one long position.
I would like to come back to the XME trade that was executed on Friday on a negative divergence, but ended up on a loss because of a stop.
As you can see below, XME broke down hard yesterday. Does it mean that the stop was not well placed. Yes, of course, it means that for this specific trade, the stop was too tight. Using stops is very tricky, especially hard stops. I only use hard stops when I am away from the markets, which was the case on Friday.
On the right side, we can see money moving back in. This looks strange. I would prefer not to buy XME, even with this positive divergence.
I also put a hard stop on the CELG trade of Friday, but that trade is still working fine and produces better returns than the XME loss.
Trading is not an exact science. The whole purpose is to be able to make constant money.
We can see below that the return for this Month (shown in Red) is back to the correlation line.
The gains are back in the uptrend.
The portfolio has been on average 50%-60% invested.
The trade ideas for today are below. The ERX short on a bounce looks the most interesting. Execution will be key because it is a leveraged ETF and a bounce on a breakdown can be volatile. Difficult to use tight stops in this type of trade.
Note the ideas colored in blue have a very low execution probability because these stocks broke down on earnings and hence might bounce hard today. However, the EV pattern is negative, which means that bounces into the resistance zone can be good short points.