Playbook exercise RHT


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Playbook exercise RHT - Jake H.

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Playbook exercise RHT

  1. 1. A Playbook Exercise By Jake Huska
  2. 2. SMB TRAINING is NOT a Broker Dealer. SMB Training engages in trader education and training. SMB TRAINING offers a number of products and services, both electronical (over the internet through and in person. SMB TRAINING also offers web-based, interactive training courses on demand. The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. SMB Training and SMB Capital Management, LLC are separate but affiliated companies. No relevant positions Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.”
  3. 3.  Look at the longer timeframe (daily/weekly) to identify clear inflection points on the chart.  For an In Play stock that is gapping higher or lower, look at the post-market price action in relation to the longer term price levels.  The risk/reward can be heavily skewed in your favor near these inflection points.  Generally, the greater the range between these inflection points, the more risk you need to put on.
  4. 4.  SPY was fairly quiet.  $169.50 had been prior resistance back in mid September and had acted as support yesterday. Below $169.50, there was $169.  Above $170.20, $170.50-$170.65 was the next micro resistance zone.  Coming into today, SPY had been down 3 days in a row.
  5. 5. ◦ Red Hat has reported a second-quarter EPS of $0.35, beating the Street's estimate of $0.33 by $0.02. Earnings per share were up 25 percent from the same quarter in 2012. Red Hat's revenue came in at $374 million versus the Street estimate of $372.11 million. Sales were up 16 percent year- over-year. Source:
  6. 6.  Looking at the daily chart, $47 was a potential level of support.  $45.50-$45.80 was an even bigger level on the daily.  1.20-1.50 range between these two inflection points, which should offer nice r/r opportunities.
  7. 7. The above is a daily chart.
  8. 8.  The after-hours/pre-market action was bearish, as sellers were in control.  Stock was trading below the after-hours consolidation, indicating that sellers were in control on a short-term basis.  $48 acted as some resistance pre-market, so looking for shorts near the level made sense with a point of potential downside until the next support level.  Could walk into something bigger if there is a flush below $47 down towards the bigger support zone at $45.50-$45.80.
  9. 9.  RHT was relatively “clean” on the open with offers holding lower.  $47.70 held, then $47.50, which led to a quick flush below $47 of about 30 cents.  The stock was pretty choppy later in the day.
  10. 10. The above is a 1 minute chart.
  11. 11.  I feel like I did a good job identifying the important inflection points, both on the longer- and shorter-term timeframe.  I believe I managed the trade well by covering 2/3 of my position into $47 as well as in front of $46.30 once I spotted some buying on the tape.  I think I did a good job later on when I reloaded on the short into the retracement and held it below $47, based on the trade idea of new lows.
  12. 12.  I could’ve tried a bit more to short a small lot in the pre-market at $48 to be in a position of strength at $47.70.  I could’ve done a better job of adding to my short once it held lower at $47.50 on the open.
  13. 13.  I would continue to use $47 as an inflection point. Perhaps they will spike it up on the open, but if it’s sold and clearly holding below $47, I’d look to initiate a short with the expectation of yesterday’s lows getting taken out. $45.50-$45.80 would be my “hopeful” cover zone.  Could look to the long side if it’s holding above $47 and takes out $47.50.