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Posted by Brandt Hackney


Publisher of Trade-Guild.net & member site Wolf on Wall Street, equities/options trader 13 yrs., 4 yrs teaching, won multiple awards for trading & indicators.

BIDU 70% 3-day gain

by Brandt Hackney on March 11, 2014

in Options, Stocks, Technical Analysis

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BIDU Follow Up…
posted by: Brandt Tuesday, March 11th,  2014


I just had to take the gain or at least a portion of it, which I took half off the table. This was a VERY small move and it is nothing like what BIDU should bring as both a put position (which half is still open) and as a core short position which is open for me as well.

BIDU April $185 puts were opened last Thursday as a trade idea which included BIDU as an equity short, here’s the link, it was only because I have a full position in BIDU (and I don’t want to violate maximum size risk management rules) that I chose a put instead…

From Thursday’s Trade Idea…

If I could add to my equity short in BIDU I would, but I have a rule about max position sizes, instead I’m going with about a 1/2 size BIDU April $185 Put which is discounted by about a third today.


I’m leaving a little room on the position because it’s just above that resistance level, if it adds a bit more to clear it cleanly tomorrow, I’ll add the rest of the full position.”


This is why I had to take something off the table considering this trade is only 3.5 days old and I think I can get better positioning on the add to or replacement of the contracts closed today…

 

That’s a +70% gain for a very short period and given the divergences in the Q’s and IWM (no matter how insignificant) even BIDU holding a consolidation may result in time decay eating away at the gain. This way I have the best of both worlds, I’ve locked in some of the gains (hedged the rest) and still have a position in case the divergences get run over, otherwise I can likely add to BIDU on a small bounce as long as I get in place at the right time while the bounce is still moving up and the 3C divergences are screaming short term negative.
As for the charts… again nothing that is impressive, but it is enough to get the job we need the market to do, done.
 This is the 1 min intraday small positive in BIDU, I can’t think of a better place to take gains than in to a downtrend.

There were some slight volume anomalies as well that would reinforce a very short term bottom, actually that’s not a good visual, say a short term bounce area which is perfectly normal in any downtrend.

 Here you can see EXACTLY where we entered BIDU on Thursday the 6th at a -30% discount. There was a little better entry on the gap up Friday the 7th which was useful as an add to area (leaving a little room in risk management for an add-to or phased entry, not typical Dollar Cost Averaging which I despise), you may recall we had immediate market wide distribution of Friday’s a.m. gap.
 On the 2 min chart there’s some migration of the divergence as you can see Thursday/Friday’s distribution event which made a great entry, these are difficult to enter emotionally as BIDU is at recent highs, but 3C’s distribution signal is telling us that’s a low risk entry at the best price.  

 Again distribution late last week on the 3 min chart, however we have more migration of the positive to the 3 min chart, this is about as far as we go which is in line with the market averages.
As far as BIDU’s larger cycle, you can see stage 1 accumulation with a leading 3C divergence at the Cup/Handle formation (yellow arrows), despite the C&H formation, the main point is the actual reversal process for a stage 1 base, the size of the base and accumulation, stage 2 mark up and stage 3 distribution which is incredibly heavy as it leads negative to a new low on the chart which is 60 mins. So BIDU is still a VERY strong core position, it is on the list for entries for new or add to positions and you know what we are looking for, when we get there I can virtually guarantee BIDU will be showing short term distribution along with intermediate and long term already in place.

This is a great example of the reversal process on a fractal timeframe, we have been watching the same intraday, but here we have it on a 60 min chart so the concept is the same no matter the timeframe, which is great to be able to apply to your own personal trading.




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