CHAP - Go Long
If you are looking for a longer term trade, CHAP may be the ticket. It recently gapped higher to all time highs and is forming a base of support at these higher levels. 
I recently started a position in this stock in one of my portfolios with a longer term trade idea in mind.
One of the questions you have to ask with any trade is what is the time frame because your risk to reward as well as the way you take your entry and subsequent positions is usually different. With this trade, the time frame is intermediate term; that is I expect to hold it for a few weeks to as much as a few months. I also expect to average into it at different price points as well. Support lies in that gap and then again at the 50 day moving average currently around $26. As a trader, you have to decide which of the two support areas you intend to use for stops in case you are wrong and then to build a strategy around that thought.
In my case, I'm using the gap as support for the initial position with the idea that I will stop out half that position if it closes the gap on a closing basis and then using the lower support (50 day MA) for the rest. In all cases, I will buy more on weakness and also plan to buy more on strength once a sufficient base is built. The stock is currently extended so I'm not interested in making large purchases at this point in time. Instead, a small entry purchase was made just in case it doesn't want to stop here. Additional purchases are planned in the coming weeks or days as it probes that gap area. Unless it violates that area, I'll continue the long ideas with this stock as it appears to be in the sweet spot right now.
I recently started a position in this stock in one of my portfolios with a longer term trade idea in mind.One of the questions you have to ask with any trade is what is the time frame because your risk to reward as well as the way you take your entry and subsequent positions is usually different. With this trade, the time frame is intermediate term; that is I expect to hold it for a few weeks to as much as a few months. I also expect to average into it at different price points as well. Support lies in that gap and then again at the 50 day moving average currently around $26. As a trader, you have to decide which of the two support areas you intend to use for stops in case you are wrong and then to build a strategy around that thought.
In my case, I'm using the gap as support for the initial position with the idea that I will stop out half that position if it closes the gap on a closing basis and then using the lower support (50 day MA) for the rest. In all cases, I will buy more on weakness and also plan to buy more on strength once a sufficient base is built. The stock is currently extended so I'm not interested in making large purchases at this point in time. Instead, a small entry purchase was made just in case it doesn't want to stop here. Additional purchases are planned in the coming weeks or days as it probes that gap area. Unless it violates that area, I'll continue the long ideas with this stock as it appears to be in the sweet spot right now.
posted by Tat | 11:55:00 AM
2 Comments:
Speaking of timeframes.....What would you say is your average timeframe, on a percentage basis?; i.e 60% of all trades are 5-7 day duration, etc. And, would you say your timeframe lengthened or shortened over the past 5 years? Do you think there is any correlation between the length of your trades and your win rate or return? What about risk? Would you say risk is less as the timeframe is shortened or is this just the perception of risk?
I've been asked the average time frame question before and have not had the time to do the number crunching to figure it out. So I took some time to consider it today and wrote some queries to analyze it. What I found was about what I expected and that is that my trade durations have proved to be shorter in recent years but the analysis is a bit to simple to stop there. Since my formatting options are limited here, I will use this topic as fodder in the next TA Daily posting. My desire is to answer you question full then. This is a great question and has prodded me to look deeper into my historical trade trends to analyze my past 4 years of trading data. Check it out on the next post.
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