29 April 2010 - Yanlord

In life, you'll find more often than not that the wise words and lessons of wisdom will all come back to you after you screw up. Here's what came to me when I looked back at the happenings of today.

1. Don't trade an inactive chart
2. Don't fight the trend
3. Queue
4. For a stock to be exhausted, the volume has to be significantly lower

And so we have the situation of Yanlord. From yesterday's homework, I've been waiting for the 4th rule to kick in since morning, bringing the price up for me to short. The price did go up, but a careful look at the market depth might have told me to keep out.

Inactivity in the chart tells me that there are little players in the game, and with a flatline at $1.68 the end of the day, I could tell that someone's waiting to screw up the shortists from the last 5 days (Force Index).

Many times during the day I asked myself if I would've made the trade if I had a view of the market depth, which leads me to conclude that the information is invaluable when making a trade. As Shifu Ang once said - the EoD charts tell you what to do, the dailies tell you when to act, and the market depth tells you at what price.

I'm in for the short, and I'm holding on. If my gut is right (and it always isn't), I'll be in for one hell of a shake tomorrow.


The Breakdown:
Chart from Yahoo Finance

Fig. 1. Yanlord Intraday Chart, 29 April 2010

Yanlord
Opening Price: $1.66 (+$0.03)
Previous Volume: 11,200 (VPH: 4,230)
Closing Price: $4.06 ($-0.01)
Closing Volume: 12,200 (VPH: 1,723)

Price Acquired: $1.67 (Shorted)
Lots Acquired: 11
Break-Even Price: $1.68

The Call: A gap up in price tomorrow means I cover. There are shortists in the short run, and the long run Force Index seems bleak. Optimistically a failed pattern happens and I get to turn profit, but at the first sign of interest to buy I should split.