Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Thursday, September 21, 2006

CLB was my Home Run

On August 30, 2006, I posted up a few short opportunities based on a strategy I have started to study and use. Similar to baseball, low averages can still make you a lot of money. What do I mean?

A player that hits .300 for a career or records an out 70% of the time has a good chance to make the hall of fame. The same holds true for stocks because a couple home runs here or there can make your entire year.

Core Laboratories will not make my year but it is one short that has made quite the impression my new technique. The stock is now down over 20% since I caught the short setup in late August. Yes, I am gloating but it’s because I am excited to see a home run so early while trading these new setups (new for me at least).

A CANSLIM investor may toss aside a 20% gain as average but this is not a CANSLIM tactic, it’s a short term strategy that is supposed to be closed within days and sometimes hours. CLB is still an open winning trade from a couple weeks ago as the stock has traded down 9 of the past 11 days but has never closed higher than the previous day’s high.




Volume has been larger on down days and the RSI has completely broken down. John Carter recommends that a trader should start watching intraday charts as the trade becomes extended so you can close out with a solid profit. However you setup your stop; DO NOT let the profit erode as that could be devastating to your emotional balance. Of the four stocks selected in late August, one worked in the short term, one failed miserably, one broke even and one was a home run. The losers or break-even stocks were cut short with minimal losses so they don’t matter to the overall portfolio. You can win 30% of the time in the market and still be very profitable! Here I recorded a 25% win ratio but the winner was big so it eclipsed the other trades and puts me in the green!

The original post can be found though this link:
Possible Short Setups

One last thing: you will notice that the gap-up from late July has been filled and it has taken two months.

Piranha

7 Comments:

At 4:58 PM, Blogger Yaser Anwar said...

Congrats Chris! I'd like to quote G. Soros, "It doesn't matter how many times you win or loose, what matters is how much you make when you win compared to when you loose."

 
At 1:25 AM, Anonymous Anonymous said...

My most recent home run has been ARDI. I have a 65% return (thanks partially to margin) in about 8 weeks. My entry was based on price support at $4.

 
At 7:44 AM, Blogger TroyB said...

Great trade Chris. If I could ask a question as this is similiar to a setup that I also use. I see the setup, but where I would see the entry is right there at about $73 and it immediately turned up to $80. I would have been stopped out. Just wondering where you entered or placed a stop in order to catch that big move? Thanks and I enjoy the blog.

 
At 8:43 AM, Blogger Chris Perruna said...

troyb,
yes that is correct btu the proper entry was the 8th as I mentioned. See my chart from this post: http://marketstockwatch.blogspot.com/2006/09/new-short-candidate-updates.html on 9/11/06

 
At 10:03 AM, Anonymous Anonymous said...

leont, trying to understand the method. hoe do you compare clb to cxw. another short selection, yet, according to ibd of monday september 25th 2006. cxw is "below a buy point of $43.46. it also indicates that volume in the retracement was light and that it would have been more serious on heavy volume. what prompted the short?. in oneil's other book on shorting, he describes a pattern where three attempts are made to regain the previous highs.then he shorts, sometimes even looking as a h/s pattern. cxw shows none of these. why the short?.

 
At 10:05 AM, Anonymous Anonymous said...

leont: i meant to say how not hoe my error

 
At 8:05 PM, Blogger Chris Perruna said...

I was looking at a bearish divergence for a short term trade (not a long term - O'Neil type short). The chart clearly explains the setup I am looking for with an entry area.

When I say short term trade; I am talking hours to a few days.

 

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