|Looks like my "gut" feeling turned out pretty good. My two positions at $0.27 and $0.28 are working out very well.
Now I have another problem...it is a good problem to have in this case but it is a problem nonetheless...perhaps you have had this problem before.
DO I SELL and take my profits and run? OR, do I hold and "hope" for more?
I am sure you have all heard the saying, "Bulls make money, Bears make money, but Pigs get slaughtered!" Translating the trading jargon, this basically states that greed will always cause you to LOSE.
I considered this question very carefully before the close and decided "rationally" to HOLD. Here is the chart...I will explain my rationale for breaking all my trading rules. ;-)
Ok, here are all my trading rules and why I have convinced myself to BREAK them on this trade.
1.) Always sell on the 3rd day up: This rule has made me tons of money. It is based on the very strange but consistent fact that stocks tend to move up (or down) in 3 to 5 day moves before reversing (pull back to support). Notice the 3 UP days. To follow my rules, I would be out today with a very nice profit.
2.) Always sell at resistance: Overhead resistance is a very important thing to pay attention to. There is major resistance at the prior recent high of $0.40. The high of today was very near $0.40. To follow my rules, I should have sold today.
So the BIG question is WHY DIDN'T I SELL? I will call it another "hunch."
I spent a full 15 minutes studying this chart before the close and the price action and convinced myself that I should wait one more day before selling.
Here are my reasons for Holding:
1.) The day ended very near it's high. Usually, when a stock (after a strong upward move) closes near its high for the day, there is still some momentum that should carry over to the next day. Notice the stock closed very near its high. I am thinking it has a bit more to offer.
2.) Usually, on an up move, the last day of the move will have a larger daily range. Daily range is the difference between a stock's high and low for the day. Right before a stock is ready to reverse, you will tend to see a very large range indicating extreme optimism in the stock with buyers pushing it higher and higher, only to have it fall like a rock the next day. (Notice the move around February 7th or so...see how you have a LONG white candle going up...then a LONG red candle coming down on the next day.) This is a very typical occurrence. Now take a look at today's move...today's range is not really much larger than any other random day in this stock, so the "excitement" hasn't hit its peak. In my thinking...the party hasn't started yet, so I should wait one more day to see if the party gets started. If it does, I will ride it as high as I can and then dump it at any sign of a reversal.
SO....I decided to stay. Only time will tell if this "hunch" will pay off for me. There is a very good chance that I could be wrong, in which case I will lose a bit of money. On the other hand, if I am right, there is a good chance to to add significantly to my earnings.
I am already up about 40% on this trade in the last 3 days so I am not concerned that I will lose any money on this trade...on the other hand, those earnings were earned by a lot of time an effort to learn how to trade so never consider earnings as money you can "throw away". You should always shoot to maximize your wins.
I spent a long time before the close analyzing my strategy on this trade, and in the end, I decided it was worth the risk at least to see how the stock opens in the morning to see if there is continuation.
How will I play this? IF, the stock opens UP, then I will stick with it and trail it up with a stop order just below its 50 period Moving Average. The moment I see weakness, I am out. My objective will be to try to get a few more percentage points. IF, the stock opens DOWN, then I will sell immediately and protect most of my profits on the trade.
OK, enough said....let's see what happens...I put my money where my mouth is, now it's time to see if I am a PIG! :-)