Trade Review: STMP, FSL, HSOL, ACHN, EPOC, CONN, FBN, MDVN

As the market went into a runaway move my trading became so intense that it became for me impossible to write trade reviews. With friday's short term climax top (supposedly) I sold most of my positions and now I'm only about 15% invested, waiting for a correction. In this post I'll discuss some of the most interesting trades of the past month, namely the ones that provide some sort of a lesson for me.

STMP

STMP is a stock I've been folloving from November 2011, waiting for an opportunity to enter on a pullback. I patiently waited for consolidation below MA50. As you can see stock even tried to break above MA50 once, but I did not buy because the volume was low and I correctly estimated that this was a fake breakout. The second breakout was on high volume. A scenario I was waiting for more than two months. But I did not buy, because I thought the market was topping. Back then I havenpt realized yet the we are in a new uptrend. It was painful to watch a 20% move, so I entered on a breakout above that minor flag right below the previous top. Which of course was a mistake. I really regret this trade because I was right about STMP all along. But I shouldn't have bought after 20% move right below the resistance.


FSL

FSL was a bit risky and unfortunate trade. I bought breakout above 16 and stock made an ugly intraday reversal. The next day it reversed again on a down day and then finally rallied. This stock likes to close off the highs, which makes it difficult to trade. I think I'll have to skip similar ones in the future.


What follows frome here are several stocks I sold too early.

HSOL

HSOL is a nice example of a launch pattern. I decide to review it due to two mistakes that I made. First, the pattern doesn't look very constructive. There are too many big volume down days in the flag. And second, once I got into the trade I sold it too early on an intraday pullback. In fact, stock has consolidated nicely and set for a breakout above 2, which is the opportunity I should've wait for all along.


ACHN

Another example of scared-out trade. I hate intraday reversals, so I sold a minor profit and then watch the stock rally 20%.


EPOC

Same story here. I caught pullback perfectly, but trailed to tight stop and got shaken out on a day of weakness.


CONN

This is just an example of a perfect pattern that failed anyway. CONN made an excellent cup with handle-with-handle, which should be very bullish. Volime on breakout was huge, so I obviously had high expectations with this one. Well, it failed the very next day. This is why you have to use stops all the time. Even perfect patterns fail!


But all wasn't bad. The following two trades were the most profitable ones in the past month.

FBN

I bought FBN on a breakout above 1.50 and sold a little above 1.80, which made me near 20% in a day. Stock then actually consolidated and rallied even more, but 20% one day gains on penny stocks have to be taken, because these highly volatile monsters can easily turn a perfect trade into a disaster.


MDVN

MDVN was a lucky 30% gainer. I bought the reversal at 50 and soon after stock made a 20% overnight gap up. I entered that day with a 4% trailing stop. Luckily I didn't get shaken out on morning selling. After the stock rallied into the 70's I set a 2% trailing stop which got me out a little below 70. A nice example of good usage of trailing stops.


Apart from these mistakes January 2012 was still one of the best months I've had in two years. Let's conlude with the lessons learned:

• STMP taught me how important is to stay objective on the market. If I hadn't been so sure about the market topping, I would've got this one (and probably many other). First follow stocks, then the market.
  
• Never follow public opinion! Through the whole uptrend most market analysts, even ones I have a high respect for, were dead bearish on the market and now behave like idiots, sitting on their miserable short positions and claiming that "market is irrational". Again, first follow stock, then the market! Don't follow the herd, which market gurus are a part of. Stocks are always right on time, general market is always late and public is always wrong, no matter what.
  
• Have initial stops in place all the time and never remove them, but don't sell stock on every minor weakness, especially if the market is strong. Start to trail only when stock reaches a percentage gain that you would not want to give away under any circumstance.
• Sell when you have a one day unexpexted profit. Most stocks reverse after strong up days and barely ever reach previous highs.