Follow Up – A Few Lessons Learned: Top 10 Trade Ideas Week of October 4, 2010

There were a few interesting lessons learned today from looking at two of my Top 10 Trade Ideas from last night.

One That Failed

Pre-Paid Legal Services, Ticker: PPD

Pre Paid Legal printed a bullish Hammer on Friday after a big down day Thursday, both of which tested and held the support area at 62. If it continues to hold then it can try resistance at 68 from the run up. The MACD is still decreasing so a tight stop or confirmation of a hold at 62 is prudent. Support below 62 comes at 60 and 59 from the run up and then 55.95, the 50 day SMA. Volume is pretty light in this stock so small size.

This was the chart and analysis posted Sunday that was used to determine inclusion in the list. I was looking to play this long on a hold of 62. Here is what happened.

Pre-Paid Legal Services 5min, Ticker: PPD

The stock opened lower today and looked like it might hold 62, but the RSI and MACD on the 5 minute chart looked ugly and unrelenting so I continued to watch. Then the bottom fell out. Turned out that watching all the indicators on a shorter time-frame was the decision to determine if the stock was going to hold the 62 support level. Having that patience kept me from a loss in this name.

One That Worked

51job, Ticker: JOBS

JOBS is posting a broadening flag after a great move higher from the 29 to 30 area. The bullish engulfing candle Friday may push it higher and if it gets through 39 then the expected target is 46 on a measured move looking at the lower mast of the flag from 30 to 37. There is support at 36 on the flag. If that fails then the next support is at the 29.50-30 area. The diverging volume on the rise is troublesome and suggested a pullback could come. Although volume is higher over the last 3 months relatively than it has been, it is a pretty thinly traded stock so positions must be small.

This was the chart and analysis posted Sunday that was used to determine inclusion in the list. I was looking to play this long on a break of 39. Here is what happened.

51job 5min, Ticker: JOBS

The stock continued to test the 39 resistance area during the day but did not break out until the last hour of the day. Notice though that the volume started to increase just prior to the break giving a potential signal. Also the MACD turned higher and the RSI began to lift. I missed the initial break out but got in for the secondary move during the flag as the volume picked up again. Not giving up on this name and looking at all the signals allowed for a nice gain into the close and a long position to carry forward to tomorrow.

Lessons Learned From These Two Opportunities

1. Patience – Since you took the time to do all the homework, be patient enough for your plan to either pan out or fail.
2. Use all the information at your disposal – In each case it was a combination of indicators starting with the price action that led to the proper decision.
3. Use the proper time-frame – In analyzing these potential trades I used daily charts to see longer trends, support, resistance and momentum indicators. That works for analysis but a shorter time-frame needs to be used for trading.

Learn something from your trades and setups everyday. Trade’m well!

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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