Flight Control - May 1, 2012

[Wei]

Hi Billy,

"initial stop at a daily close below QS1 (45.75)", this is something you have to execute manually, so it's a mental stop not a hard stop, right?

[Billy]

Hi Billy,

"initial stop at a daily close below QS1 (45.75)", this is something you have to execute manually, so it's a mental stop not a hard stop, right?

Yes, Wei, you need to monitor the trade evolution in RT to follow the discretionary plan. An intraday undercut of QS1 is normally not enough to stop me. It is the reaction to the undercut that matters. QS1 has been chosen as a stop because it is a key mid-term support where buy programs are supposed to kick in if large players want to participate cheaply (below the 5-day VWAP) in the uptrend. They may first go fishing for stops if they have the opportunity to take advantage of an undercut, so a hard stop at or just below QS1 is not advisable. The probability is high there that large buyers will soon come to the rescue. If they don’t come in before the close, then you know that they had no running plan to accumulate around QS1 but perhaps lower at WS1 or YS1 and it is safer to throw in the towel. It is in such situations that I find the RT MF most helpful to gauge institutional activity around an EOD stop.
Billy

[Wei]

Thank you so much for such insightful analysis. Much appreciated!