How We Traded KLAC Yesterday
One of the most
important rules I know and adhere to as a trader is to never try to
outguess a trading range. The current S&P chart, on a 5-minute basis, is a
great example of this. It is always easy in hindsight to see that your analysis
was correct. However, making a stand in a trading range is like flipping a
coin, 50/50 odds. I need more of an edge than that to make a living.
While the opening yesterday offered a nice
pull-back long entry, after that, there was little to do. Well isn’t there
always something to do? No, not when you have a chart that looks like the one
above. The 60-period ema is flat-lined, and with critical support at 1021 and
critical resistance at 1030, picking the direction with any edge is very
difficult. The opening is really the only time you can play a trading range
with any edge, after that volume and liquidity begin to drop off.
We (me and the participants in
my Trading Room) did catch a long trade on KLA
Tencor (KLAC) and did OK, however after that trade the risk/reward
was simply not there.
The exit on KLAC
was a function of 2 items, mainly the failure of the S&P’s to make higher
ground, but also the FN at 57.73, key
resistance. The FN is never itself an absolute, it need to be factored in with
current market dynamics. Prior to the exit, the market was moving higher, as a
result the FN was disregarded. However, once the S&P momentum slowed, there
were 2 pieces of evidence that indicated you needed to lock in the profits.Â
Profits were taken at 57.58 and 57.59 as well at 57.46. Not much, but the trade
was executed properly, and that is what is important. Eventually the range will
be broken, and prudent entry and exit techniques will yield a few home runs, but
singles and doubles is how you make your living as a trader in the meantime.
In recent articles I have tossed in some comments
regarding Forex (FX) trades. It sparked
several questions, mainly wondering “why” and “how”. Naturally I cannot address
the answers in their entirety here today, however over the next few weeks and
months I will be sharing thoughts, observations, tactics and actual trades with
you. FX is a fascinating and wonderfully challenging instrument to trade, I
look forward to sharing it with you.
Currently, I am short the Euro (EUR/USD)
based solely off the daily chart as well as some macro factors that certainly
favor the dollar. While the trade has been open since Tuesday, it remains
range-bound and slightly out of the money. My entries were 107.81 and 108.36.Â
The unexpected rise in unemployment claims put a bid in the Euro although it got
stuck at the 108.70 and 109 level. I am still sticking with the trade for now,
although I will admit it is not playing out the way I had envisioned. Over time
the Euro will likely trade lower (fundamentals typically win out with FX), but
one cannot get so hung up on the analysis to not see that perhaps the timing is
just a bit off. If the Euro can sneak back below 1.0765, the trade should pan
out.
Update:Â As of this morning, the short
EUR postion was stopped out on the heels of
the employment number. All currencies traded sharply higher on that news. It
is time to re-evaluate and seek other opportunities.
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As always, feel free to send me your comments and questions.