I had marked the two orange lines as potential target levels for price to hit. The first was hit just before price dipped steeply and stopped me out. The second target was essentially reached at the 1:35 pm candle. I was out of the move compliments of getting punked at the 1:20 candle. However, this is the gamesmanship that is played and I must adapt my trading to this repeated pattern of behavior. Had I left my original stop in place (see short red line), I would have been in for the fifty cent ride up to my targeted price level.
If one looks at the chart from a tactical perspective, the following emerges:
1. The 12:40, 12:50; 12:55; and 1:00 candles all have long lower wicks where price pushed down and stops were tripped and buyers went long eating up those shares from the tripped stops, causing price to jump.
2. Same long lower wick on the 1:20 candle, the one that stopped me out.
3. It is customary to place a stop just under the low point just prior to where one enters.
With this in mind, the chart shows that there is a limited safe range where one could have entered long and not been stopped out. I was on the very edge of that safe zone and was able to survive, though just barely. I was nearly stopped out at the 1:00pm candle. Stop placement is critical when trading volatile stocks as they turn direction. There is a lot of gamesmanship by big players, pushing price back and forth stopping out the weaker hands; by weaker hands I mean those who are not willing to take a lot of stop loss risk and set tight stops. The big boys get traders to commit in the wrong direction during choppy consolidation as I have been doing at times this week. An example of chop on this chart is the band between 12:40 and 1:00 pm. There is a lot of "Trade the Traders" instead of "trading the stock" going on in this band of consolidation chop.
In my case here, I decided to minimize my stop loss risk by moving my stop line up from the original $115.75 level to $115.87 and I commited myself to playing a "weak hand," to use a poker term, and weak hands are preyed upon by stronger hands. I had only a marginal entry price, but I had placed my original stop at a level that just passed the test to keep me in the trade. I was more "lucky" than "skilled" in that regard. The best entry on this move would have been getting long early in the 12:30 candle after price dipped down in the red 12:25 candle immediately prior; with a stop under the low of that 12:25 pm candle. Only this area would have been really safe to prevent stopouts as a result of the long lower wicks between 12:40 and 1:00 pm. Those long wicks shook out many longs that got in during the 12:40 to 1:00 pm chop. Note that the 1:00 pm candle has the longest wick of all and dipped lower thatn the four wicks just prior. That was by design... tripping those last stops. This last "punk out" candle set off the stops, provided the extra shares necessary to fuel a move up, and price did just that! It took off from there to reach the $116.08 level (where I had my first target marked by the orange line). On the candle that I got stopped out on, price was quickly driven down again, stopping out many of the longs who got on board as the move up took place. Late comers, playing "weak hands," weak hands meaning traders with tight fearful stops, traders without stops who were willing to sell at the drop of a hat out of fear of reversal against them, and those who were playing it "safe" by waiting to get long after the move was already in full motion. All of these players with "weak hands" were sent packing with the 1:20 pm long lower wick candle. And when they got out, the big players with strong hands used the liquidity to fuel the next leg of the move up to the $116.40 level (where I had my second target marked with an orange line.)
-
Gamesmanship, that's what I believe it is.
