The Day that Was - July 20th 2007

The day started out with Biovail (BVF) releasing bad news stating that they received a letter from the FDA rejecting their drug submission. I announced this morning that I was selling my position in the pre market trading to close out the trade. I got multiple fills on my sale but the average sale price I got was $23.35. Recall that the trade on BVF was started on 7/13/07 with a 1/2 position. BVF never made it to the next step where I would have added the remaining funds to the trade. This is one reason why I scale into a trade. You grab the low price upon the technical parameters for the trade being met, then you add to the trade upon confirmation the trade is working out. With BVF it broke above the buy point on 7/13/07 and I entered the trade with only a 1/2 of my normal swing trade funds. Then BVF started pulling back when the markets came back down. So my trade on BVF never reached 'full swing trade size'. By scaling into the positions I reduce the risk to my total capital until I see more evidence that the trade is going in my favor. Bad news from companies can't be avoided, it happens to all of them at some point. That is why as swing traders we slice up our total capital into pieces and never put more than 10% of our total capital into any one trade. Limit the risk to your total capital... That is the only way to win in the long run. Never put all your money into one trade!

Even with the 10.9% loss on BVF today the overall RebelTrader portfolio gained an additional 1.02% today. Not bad considering the market was terrible today. Good gains from WDC, NHWK, WWAT helped the portfolio stay green today in this otherwise bad day in the markets.

This morning I highlighted a small cap stock that had a technical setup which looked right for consideration as a swing trade. I set two buy points, the first at $1.55, and the second at $1.65. The first buy point was reached today and I scaled into FEEC with a 1/2 position. When FEEC moves up past $1.65 I will scale in with the remaining 1/2 of my swing trade funds. FEEC is a company in the foreign energy market and is involved in the exploration of natural gas. This stock may not move instantly upwards overnight but the chart was right for an entry. I will keep a close eye on this one. The potential for large gains is there as is the case with many small cap stocks however it comes with extra risk, and that is why one should never play small cap stocks with all of your money. You should only have one active speculative play at a time in your portfolio. WWAT is the other speculative play I did and that has paid off very well. Even though I still have half of my shares in WWAT it is now in self sustaining mode. I have a stop loss set and the trade will close itself out if the price falls (and that will still be a profit) or I will sell the remaining shares upon the next price advance. Note: Today WWAT started moving back up again and is still looking good on the chart.

In the late afternoon I added to my position on NHWK. After the large move up yesterday I was anticipating a low volume pullback today and would wait for the next ideal point to scale in the remaining funds. But NHWK defied the broad market today and continued upward today. I added the remaining 1/2 of my trade at $20.76. I see NHWK being a trade that will probably be a couple weeks to reach it's full potential. After a move like it has had the past two days there will be some profit taking in the stock but the chart is showing an increase in demand so I am looking for at least 10% total gain on this trade within the next couple weeks.

The broad markets were reacting today to the news from Caterpillar and Google. Both had less then perfect earnings and shock waves went through the markets today. In addition to that the financial/broker sectors continues to be an anchor on the markets dragging them down. We need to see a rebound in the financial sectors soon, otherwise this drag on the markets will start pulling harder on other sectors.

I want to thank Daniel and Michael for your nice comments today. Earlier in the month I said that I was going to post a series of articles on the basics of swing trading, a 'swing trading 101' based on my studies and experience. But time has been hard to find and I have not had a chance to get the first installment posted here yet. But I will indeed keep my word and in time you will see here my series of articles on how I swing trade, what do I use, what I look for, technical analysis, and money management.

I wish all a great weekend !

Chuck (Fp80)