Trade Review via @MarketPicker:

This particular trade review is a little delayed, as I’ve wanted to do it for some time now. At any rate, I want to discuss a trading lesson I learned a couple weeks ago when I was trading ARUN after it had reported earnings. To put the stock in context, it was in a longer-term downtrend, and it had actually gapped down about a week prior to gapping down again after earnings from about $22 down to $17. On Thursday, 5/16/13 it was gapping down after-hours yet again. The stock was trading around $14.70 after-hours when I last looked that Thursday night. My plan for the next morning was to see where the stock was in relation to its after-hours trading. If it was below the after-hours low, then I would look to put on a high-conviction short and not look to cover until $12.40-$12.70 which was longer-term support. This name was one of the top names on my watchlist that day because I had a strong conviction that I could capture a nice down move that would trend rather nicely. I even noted this on StockTwits (see below). However, when I came in the next morning, my plan to short the stock & capture a sizable down move had already played out in the pre-market (without me involved). So when the market was about to open, I didn’t feel the risk/reward on the short side was very favorable. This isn’t to say I was looking to go long immediately when the market opened, especially since there was still a little more downside to my ultimate downside target. So I waited for the open. The stock quickly spiked down to $12.38 on the open, which was the lower-end of my ultimate downside target from the after-hours the prior day. The stock rebounded off that level a bit and began to consolidate above $12.70. I tried getting long earlier but was stopped out. However, later in the day when I saw that it was still ranging between $12.70-$13, I got back in at $12.70 with the understanding that it had touched longer-term support and bounced & was now consolidating above longer-term support. I took the stock out overnight as a swing. The stock ended up trading above the intraday resistance level of $13 into the close and opened above that level the following Monday. The stock closed at $13.50 the following Monday after the gap down, roughly 6.2% higher than where I had gotten long. I raised my stop, and I was looking to capture a move up to $15 or higher in my swing long position. However, I was stopped out the next day (Tuesday, 5/21/13). As of this post, I have no position in ARUN, but I’m still interested in its technicals and recent price action. Perhaps I will look to play a retracement up to $15-$16 via a call spread, but that’s for another time. Going forward, ARUN had an inside week this week (5/20 – 5/24); above $13.61 would trigger an inside week & up, but we shall see how this plays out. I still believe this should see a move up to $15.50-$16 over the coming weeks.

Weekly view of ARUN, highlighting $13.40-$12.70 longer-term support:
Weekly view of ARUN, highlighting $12.40-$12.70 longer-term support:

 

2 day, 15min view of ARUN (5/17 - 5/20), showing s/r levels:
2 day, 15min view of ARUN (5/17 – 5/20), showing s/r levels, including pre/post-market data:

 

30min view of ARUN (current) with entries & outs:
30min view of ARUN (current) with entries & outs:

Let me know if you have any questions or comments (@MarketPicker on StockTwits).

Trade Review – ARUN: Knowing When to Change Your Bias (via @MarketPicker)