CROX trade (Newly, you asked...)
I have no special talent for trading these dropping knives. I have been caught on the other side of this sort of trade often enough that it would seem to be more luck than anything else that I was on the winning side of this one, for a change.
I was in SNDK during that drop and didn’t bail ‘til much too late in the game. I have noticed a few things about these big negative movers that I used to my advantage this time.
1. Unless you are very agile, if you are in one of these when the news hits then the best time to bail is now.
2. These things take about three days to play out (CROX has finished day 2).
3. Long term charts are very good to find turning points during the drop.
4. Patience. Many of these turning points are not hit on the first day.
I’m not much of a day trader and have never before traded CROX. There is nothing I find fundamentally attractive and I had no idea where the run would end. I did look at the various charts on Wednesday evening when the earnings news hit and saw the reaction. After checking the 2½ year weekly chart, it seemed to me that the inflection at the 42.5 to 45 area looked like a good support point, especially since that is an area of good supporting volume. I put in an order at 45 on Thursday, but of course that didn’t hit. Thursday evening, I thought about it some more and figured there would be a good chance, but I had better plan the whole move or I’d get shaken out early. Friday morning, I put in bids for 45 and 44. As luck would have it, they both hit. I put in sells for both positions at 50 and left for a 2-hour walk. When I got back, I was pleased to see that all of it had sold. I did not really think that 50 would hold, nor did I think it would be a good idea to try it again on Friday, unless they brought it back down below 45. Being gone during this period kept me from being greedy and changing my sell point.
The difficulty and danger in this kind of trade is that you are really matched against the pros. Still, for the most part they see the same things I see and it is the people that have bought into CROX during its run that they are trying to stampede. I picture a herd of cattle with cowboys at one side, gun a blazin’ getting the herd going in one direction, then a bunch more at another point shooting away at another point to scare the herd and get it going in another direction. If I’m in the herd (which I have been many times), I have a hard time picking the critical points and tend to panic with everyone else. It is easier and safer to watch from afar, pick your entry, exit, and stop points carefully and ignore whatever else is going on. “Plan the play and play the plan,” as Dr. Zeev Hed has said enough times.
Anyway, it worked for me this time. The shares I bought at 44 were in my brother’s account, which I control. I also had him in SNDK, for which we took a loss, so this makes up for that one a little bit.
Jay
