Tuesday, September 26, 2006

ROK Changed It's Mind

So, I think it was yesterday that I said I don't think ROK was strong enough to sustain itself above $55... And then it closed at $55.13 and I was stopped out of my position when it breached my stop that was set at the 2 days ago prior high. Of course today ROK gained 2% and I bought my short sale ($57.57) back for $55.60. A 3.3% gain (adjusted for Cost of Trade) over 7 trading days. I'm not one to argue with the market, and I'll happily take my 3.3% gain and say thank you, however...

I could have got more like a 5% gain if I interpreted the news headline: "Rockwell Automation to Present at Prudential Conference" as positive news that other traders and investors would want to buy ROK based on the results of that conference presentation. Combine that with the narrow range candle (almost a Doji) on Friday that could have been interpreted as an exhaustion gap (the % distance of the gap wasn't quite enough for me to jump ship) and I could have exited earlier. I stuck to my trading rules though because none of that had quite enough certainty. Based on the information I had, I decided that I'd leave it some wiggle room to hopefully let the trade develop a little further before tightening up my stop. I do want to review this with coach Rob and see what he thinks of how I handled it and accept any criticism offered.

In other news, I have a problem of my open trades working for me. It's a good problem to have, but I don't have quite as much experience managing the trades when they're working for me! I have 6 open positions (LNC +1.5%, T +5.4%, AMAT +2.3%, NAV +3.54%, GM +0.7%, OSI -0.4%). As you can see, this is a very good problem to have, but knowing that the markets are a bit overbought and we're more likely to see some profit taking than not tomorrow has me a little twitchy on these long positions. I'm going to follow the rules in managing these, but may tighten and get out on early signs of sell-off in order to actually lock in those profits. Stay tuned, it's just beginning to get interesting!


Rob said...

Looks like ROK is seeing some resistance on the 13ema/20ma, and tomarrow (if the markets are bearish) would pose as a nice opportunity to confirm/deny the present trend. Thoughts?

Trader Taocode said...

Yes ROK has been doing a pretty decent job of bouncing off the decending 20dma, and the institutions sent a lot of sell intentions later in the day today around the $56 mark, however it failed to put in a lower swing low on this last bearish movement. Although I think it could easily sell off a bit tomorrow (especially given that I think the markets are due for some profit-taking), the pending news item is probably a feel-good presentation that will bring the stock up a bit and may even reverse it's direction or send it trendless for a spell (probably around the 56 dollar mark, given that it's found both support & resistance there many times over the past year).

The volume characteristics are still pretty favorable for a bearish move and the CMF is still slightly negative. Stochastics are showing some divergence (it didn't oscilate down as low as the prior swing lows), though the distance it traveled is close to equal to the previous low oscilation.

Bottom line is I'm reading it as a weakening trend and why bother trading a stock that casts so much doubt? There are LOTS of other stocks out there... I think I'd rather find another for my money.