Listen to Your Stocks and Adjust the Plan: Case Study CPWM

One of my Top Trade Ideas from Sunday, shorting Cost Plus (Ticker: CPWM) came through in spades. It had closed Friday at 8.77 after a 4 day run lower but gained renewed life (death?) when it closed under the 50 day Simple Moving Average with no near by support. My target was 8. This is what I saw before trading it Monday.

I got in short at 8.73 and it immediately ran lower the next two days closing Tuesday at 8.30, after trading as low as 8.23. The move down to 8.30 was a 5% win for me in two days. In retrospect, it was also the time t get out. On Wednesday the stock opened at 8.35 and traded down to 8.26 before a massive move up starting around 10:20 that took it to 8.70 and stopped me out at 8.38. I had a nice 4% gain but totally botched the trade. How so? Look at the intraday activity for this week on a 5 minute chart below.

My entry and exit are posted on the chart. Notice how I screwed it up? I was so set on my target of 8 from my analysis on the weekend that I ignored the improving Relative Strength Index and Moving Average Convergence Divergence mid day on Tuesday. In fact this stock gave me from 11:30 Tuesday until the end of the day to take home a 5% return on my short in just two days. And then it gave me that opportunity again briefly Wednesday morning. Can you say idiot?

The point I want to make is that you should have a plan and do research. That plan and analysis can be right and you can still mess up a trade with poor execution if you do not continually listening to what your positions are telling you via the price action. Just because I saw support at 8 never meant it would get there or rest there, and in fact the stock showed me that support was closer to 8.28. Not hearing that message cost me an extra 1% in a winner.

Trade’m well.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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