Trade That Did Suck and Then Flipped Me Off
My buddy BC Lund writes a series of blogs that are titled "Trades That Didn't Suck" and as soon as I get a good one I will rush out a post along that line.
As is, I am sharing a Trade That Did Suck and Then Flipped Me Off from today and I hope you take some value away from it. If not, at least laugh at me a little.
Back on January 31 I opened a position in WTS (Watts Water Tech Inc.) and I have posted the charts of the setup on the blog (search WTS tags). I had the stock just under $38.50. I have been holding this one a while and it has done reasonably well.
I was running through my open positions this morning (AREX, BANR, WTS) and that's really when the fun started. On Finviz I saw the earnings section for WTS read as "FEB 20 AMC" as in YESTERDAY after market close. I was really shocked and consulted my little trading booklet where I keep things I need on hand written down. I had WTS earnings for February 22. Obviously I was wrong and it made no difference at that point in the morning how I had the wrong date.
A few curses later, I looked around for some news on the WTS earnings. Seems they slightly missed estimates (of course) so I was expecting to be taught a nasty lesson about rechecking earnings dates for open positions. WTS is sort of an unknown name and there were no pre-market trades to check this morning before the open until about 9am. This stock is so unfollowed I could not even find solace in a Yahoo Finance message board ultra bull pumper to make me feel any better.
All indications were that WTS would open down about 3-3.5% which would eat up almost all my gains in the name. If you have ever been long into a missed earnings report you know that's not too bad. Down 10-20% is not uncommon. I figured I could wait for a bounce after the open and exit the stock while salvaging a small profit.
Armed with my new plan I saw the stock gap down hard, but then there was a solid bounce taking WTS back over $39 where I exited the trade for a gain of 1.4%. To this point I have made the major mistake of having incorrect information and not being on top of earnings dates for an open position. I walked away unharmed, but that's not a common outcome on a screw up like this. I have February 22nd noted on most of my material for the WTS trade so something got mixed up. My blunder.
And now for the second part of the trade where WTS flips me off.
I was more worried about not getting caught up in a sell off this morning to note the stock action as much as I should have. On my chart for WTS it's clear that $38.30 was the scene of the breakout and even with the gap down this morning, it never broke back below that price. Had I been a touch more calm and had more time to look over the action I would have noticed that huge flag. And then the buy interest came in. Big time. What started off as an earnings miss gap down by day's end had become a monster bullish engulfing candle (click for larger view):
So I would say WTS is giving me this right now:
┌∩┐(◣_◢)┌∩┐
To recap:
-I had incorrect earnings date
-I failed to keep key support levels for this stock in mind
-I pushed to close a trade more out of rushed fear than a place of calm
-I failed to remember that in 2012 missed earnings are actually a good thing (kidding, slightly)
Poor execution all around and it's probably my worst trade since last Spring (there were a few around that time). If this can serve as a wake up and keep me focused then I will take that as a positive going forward.
Have a good night.
5 comments:
I could never laugh at you! Very insightful post. Not easy to analyze a mistake so thoroughly and know exactly where you went wrong. That's impressive and admirable all by itself.
Wow, what a horror story. But at least you took ownership of your mistake. That will serve you well in the future.
You only make or lose money when you sell. The problem is knowing when to sell. That's the real lesson here.
This all sounds so scary to me. Glad to see you have a good head for such things, and know when to cut your loses.
Really insightful and helpful post. Post-trade analysis a hallmark of great traders. However, the market didn't know where you bought the stock so the question at the time to ask was: "If I'm not in it, would I buy it here?" If the answer was yes, the focus should have been on sticking with the trend and not on your PnL statement at that moment in time. My two cents. Good lesson though.
JH, thanks for the kind words.
Gawains, well for yesterday and today I was wrong to sell, but what can you do.
David, Its not that scary with position limits and other boring stuff!
Ron, thanks for the feedback. I mentioned in the post I should have been watching the key level more close, I would have held the stock.
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