Читать книгу Encyclopedia of Chart Patterns - Thomas N. Bulkowski - Страница 94

Abercrombie & Fitch Co. (ANF) in 2017 had been trending lower for almost a year after peaking in March 2016. I saw a big W forming and thought this would make for a good bottom‐fishing trade.

Here's what I wrote in my trading notebook. “Buy reason: Extra cash. I'm hoping that this will be the start of a rebound, a fallen angel–type play. Earnings were good and the stock shot up and then threw back, as expected. It should recover from here, based on a good earnings surprise. If not, then sell when it gets in the 10+ range to keep the [dollar] loss small. The odds don't favor this trade, but I'm betting the stock has bottomed and will recover from here.”

The earnings announcement saw price climb from 11.69 to a high of 13.75 the next day, or almost 18%, but it retraced most of that gain by the time I bought on 10 March. I received a fill at 11.68. The position size was small, about one‐fourth of what I normally trade, and that told me I was concerned about the stock.

I sold the stock (at 10.92) after the report of weak same‐store‐sales numbers less than 2 weeks after I bought, taking a 7% loss.

This was one of those trades where the smart money is just waiting to trap you. I sold the day price bottomed. The stock recovered but only to 12.46 before dropping again. The stock bobbed up and down, eventually making another big W in August and September 2017, which was the real bottom. From there, the stock climbed from its confirmation price of 10.49 to peak at 29.20, or 178% higher.

My instincts were good. I picked a stock that almost tripled except the timing was wrong. I missed entering a winning trade by 6 months.

I made a perfect entry, buying after a throwback completed, and sold on the day price dropped (but didn't close) below the bottom of the big W. If I had waited for price to close below the bottom of the big W, I would have stayed in the trade longer but would have taken a slightly bigger loss.

The big question comes from a curious mention in my notebook: “The odds don't favor this trade.”

 Lesson: If the odds don't favor the trade, then don't make it.

 Lesson: Keep the position size small if you believe a trade is risky.