Catching the Knife….BAC, Patience and Fortitude

It was Tuesday November 30th and the world was going to end, at least for Bank of America. WikiLeaks had spilled gobs of secrets over the weekend and stated they would release damaging information about a major bank in the new year. Rumors started to circle that it would be Bank of America, ticker BAC. Bank of America, really, the bank that has had every little secret about the Merrill Lynch merger, CountryWide etc dragged through the press? What could they have? Movies of Brian Moynihan and Ken Lewis sharing a room on a business trip? Well it does not matter, I follow price action and had been watching BAC for some time meet support at levels just below $11.00. This was a also an area of support from the weekly charts from 2009. But more importantly as the volume kicked in it was not going any lower.
BAC 5 Minute

BAC Weekly

As the day was drawing to a close it was catching a bid at those same levels. I bought a lottery ticket, the December 3, 2010 11 strike calls for 17 cents. I was willing to lose all of what I paid, but I expected that as rational minds had overnight to think further about BAC the price would revert the next day back to its previous level just above 11.30. You will see that bias clouded my judgment.  What happened?
BAC 5 Minute

Cooler heads did prevail and the stock opened higher, but then immediately started to tail off. Having made some money on my lottery ticket I took it off for 25 cents, up just under 50%, Not a bad trade huh? Well it was. It was a panic move to sell on what was now a 3 day option, that just the night before I was prepared to ride into the ground.

Maybe it was right to lock in my gains. But I was not patient. The broad market was rising and BAC was falling. It was wrong to change my plan. The stock had not yet retaken the 11.30 level, so I should not have sold it. As it turned out if I had held steady I could have sold near the end of the day for a 100% gain. Some of you are probably looking at the chart and seeing that if I held it over night last night it could have been sold for a 400% gain today. That would have also been against my plan. More learning and practice for me.  What is your plan?  What would you have done?

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