I like this stock — and I may trade it multiple times…

  • September 13, 2005
  • Michael Kestler

Monday’s
markets provided another active and challenging day. The  filter
I use came up with a number of alerts in a variety of stocks. 
Montpelier RE Holdings Ltd
(
MRH |
Quote |
Chart |
News |
PowerRating), Corning
(
GLW |
Quote |
Chart |
News |
PowerRating), Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating), AK Steel  Holding Corp
(
AKS |
Quote |
Chart |
News |
PowerRating), Albertsons
(
ABS |
Quote |
Chart |
News |
PowerRating)
and Commerce Bancorp
(
CBH |
Quote |
Chart |
News |
PowerRating) were all trading in above-average ranges
on larger-than-normal volume. This combination can produce excellent trading
opportunities as they arise throughout the day.

Before I go on, I would like to remind everyone that I am
an extremely active trader and trade rather furiously as opportunities present
themselves. I react and enter trades to quickly take advantage of a fast moving
market. My expectation for a trade may change by the hour, by the minute and
even sometimes by the second. I am never locked into being only short or long.

Remember, there are always two sides to every trade. When
a stock reaches a support or resistance level, it is going to do one of three
things:

1.) The stock will bounce off of the support level and
provide a rally.

2.) The stock will hesitate and then sell off through the support.

3.) The stock will hesitate, go into a flat line consolidation and do nothing
until it decides an ultimate direction.

As a trader, I have to quickly assimilate a number of
factors and take the trade. What I usually do is I try to think ahead. If the
stock is trending down I like to do the A-trade. I like to go short with the
trend. However, I am always aware the stock price could bounce, so I look for
factors that lead to the belief that a bounce will occur. As well, I am always
asking myself when should I cover and go long. None of my trades are as easy as
“get short or long and put my feet up on my desk” and collect my fortune. I am
continuously evaluating the trade. At times I may cover to lock in some profit
only to get short once again a few seconds later. In the manner I trade, setups
appear and disappear quickly.

A perfect example of a stock I traded in this manner is
(
MRH |
Quote |
Chart |
News |
PowerRating). MRH came up
on my scanner at a previous day low of $26.00. Although I wasn’t able to get
short until $25.80 (I felt that this was a little bit of a chase at this point
but was willing to take the risk because there was a large offer in the NYSE
openbook at 26.00).

I was looking ahead. I was thinking I definitely wanted to add to my short at
$25.00 and see if this stock will continue running to the downside. When MRH
failed to break the 25.10 support level a number of  times, I covered my
short with a trailing stop. I then looked for a reversal point to be long the
stock. MRH did eventually reverse and I was able to add to my position a few
times. (please see chart below)

Just as I break a stock down minute by minute, I will look
at MRH to do the same thing long-term. If MRH goes to test its low Tuesday or
Wednesday or 5 weeks from now, I will be looking for the short through 
25.10. At the same time I will be looking for the bounce back up from 25.10

As I previously written, I have been trading ABS actively
the past week. ABS tested the low of 23 last Thursday. When ABS failed to
decisively break below that support level and stay below, I quickly turned
bullish and went long a number of times on Thursday and especially last Friday. 
So if you read today that I have an opinion on a stock, remember I will have
changed it very quickly if the stock did not do what my A-trade was looking for.
Again, remember there are always TWO sides to every trade no matter the time
frame: years, months, days minutes and in my case…seconds.

Please e-mail with any questions
mike@evotrading.com

Mike Kestler

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