WFAD #37
$KORS, $AA, $MCHP & $DOW
$KORS
Michael Kors Holdings Limited, $KORS [NYSE]
Consumer Goods | Textile — Apparel Clothing | United Kingdom
The first trading idea was buying stocks of Michael Kors Holdings Limited ($KORS) (see pic. 1).
The result is shown on the pic. 2.
Our buy setup was based on the idea of taking a part of a potential upside correction, which had started from our point of view.
In the left part of pic. 1. you can see a pattern, which looks like a bullish Island reversal bottom. That pattern was our basis for going long. Then we identified the first upside impulse and correction, then again a local Island reversal, small impulse + correction. So we had a series of bullish signals and moreover, that was a period of trading, when we were making an experiment with mutual usage of technical and fundamental analysis. Fundamentals of $KORS were very attractive, so we decided to buy a pullback to probable corrective structure breakout (higher green line on the pic. 2).
Unfortunately, at that moment market didn’t think, that this stock is ready to go up, despite it had excellent fundamentals and financial ratios. Very soon a pullback has become a new downtrend.
When we saw, that something was going wrong with our trade, we closed this long (see pic 2.). As you can see now, it was a rather reasonable risk management decision.
Mistakes in our trading tactics and strategy:
- We didn’t see the whole picture (analyzed only a part of trend). We should better have something like shown on the pic. 3.
- We mixed technical and fundamental analysis and substituted (partly) strong technical entry point with fundamentals of $KORS. The idea was to buy a pullback, but we should wait for a local bullish model for more confirmation.
The result is shown on the pic. 3
Loss from this recommendation = appr. -6.77% in 3 days (-812.4% annually)
The lesson is =>
- Do not buy «falling knifes». Wait for the best entry setups.
- A mixture of technical and fundamental analysis usually makes the decision making process more complex and difficult and can mislead and even create false trading signals.
$AA
Alcoa Corporation, $AA [NYSE]
Basic Materials | Aluminum | USA
The second recommendation was buying stocks of Alcoa Corporation ($AA). (see pic. 4).
The result is shown on the pic 5.
This is the perfect case. We did this trade almost outstandingly.
We had here a bullish continuation setup (pennant) formed after main bullish reversal pattern (H&S bottom). We bought, when pennant was broken up. It was a very strong move +4% in the first hour of trading activity. Someone can think, that if you missed +4% in one hour — it is too late for a deal. Actually it is not… ;)
Our main mistake was calculating the target. We did it, concerning potential of the bullish pennant. And it was not reached. We leaved market, when we saw a bearish reversal pattern (ending diagonal). Actually, minimal price target of H&S bottom was reached successfully, so we decided to be out of the market at least till $AA is in correction.
Profit from this recommendation = +20.02% in 38 days (+189.66% annually)
The lesson is =>
- «Buy high, sell low». The best trading setups give the best profits.
- Make projection of a potential target basing on senior TA patterns.
$MCHP
Microchip Technology Incorporated, $MCHP [NASD]
Technology | Semiconductor — Broad Line | USA
The next recommendation was buying stocks of Microchip Technology Incorporated ($MCHP). (see pic. 6).
The result is shown on the pic 7.
A standard buy setup — 2-bottom bullish continuation pattern, formed above 50-MA and 200-MA. We bought a breakout of the 2-bot. When company published its earnings, price of $MCHP continued to move up and gapped +6%. We took profit at the open at that day.
Profit from this recommendation = +10.78% in 21 days (+184.8% annually)
The lesson is =>
- Stock price will rise till market has a buying power. Standard TA models help to identify moments, when the market is ready to continue moving.
$DOW
The Dow Chemical Company, $DOW [NYSE]
Basic Materials | Chemicals — Major Diversified | USA
The final idea was buy stocks of The Dow Chemical Company ($DOW). (see pic. 8).
The result is shown on the pic 9.
This idea was also a standard trading setup. We bought a breakout of a local H&S bottom and took profit at our target level. After the moment, we took profit, the price of $DOW continued to rise. Was it a mistake of managing the trade = taking profit too early? It depends on your strategy. We did everything according to our plan. We think, that it is a rather good trade with risk/reward ratio = 1/3. We’ll see what will happen next.
Profit from this recommendation = +12.55% in 21 days (+215.14% annually)
The lesson is =>
- If you have a plan, stick to it and do not be greedy. Any successful trade with R/R = 1/3 (at least) is an excellent result.
