Michelle B submits:
After noticing PSA on the top ten losers’ scan on the NYSE during this past Friday morning, I checked out its daily and saw a potential second, measured down leg from a bear flag:
PSA gapped down a bit at the open, did a down leg, based at its lows, and then at 1 P.M., a delectable 30 minute NR7 formed. When the NR7 broke to the downside, a second, measured intraday down leg happened on strong volume.
When the intra chart pattern echoes the daily chart pattern, a high probability trade results.
Despite the clarity and potency of this setup, PSA in itself was not an easy stock to trade. Watching its tape showed me that the bid/ask spread can widen suddenly, forming candlesticks with long shadows, making hard stops problematic. I decided both to forgo a short stop to enter the trade and protective stops to preserve profits. Manually placed limit orders were used instead, and because of the large potential R profit, I was willing to both chase an entry and close it with a cushion above the target via limit orders to ensure a clean entry and exit.
In other words, the cook pot, so to speak, needed to be watched constantly. Because of the way PSA trades, I realized that once the measured move was made, it had the capacity to bounce hard–and it did, almost to the bear flag breakdown level! So when the price neared my target, I would be ready to cover at the ask. Experienced traders covering at the ask is one reason why stocks like PSA bounce so hard!
Because of the brittle way PSA trades, I used a smaller than usual lot size to accommodate any slippage or treachery in the form of a reversal to the upside. Because of the anticipated reliability of this pattern, if there was any hints of reversal, traders would throw in this particular towel so fast, that a potential loss could be significant.
Unfortunately, my ATP (Advance Trading Platform) was unable to affirm that orders were alive and that orders were filled, so I needed to check outside of my ATP to confirm both that my orders were live and they were filled, and then I needed to exit the ATP several times and re-enter so my real-time Profit/loss would show. Because of those problems, my lot was not filled completely.
In summary, the short entry was at around 107.30, the target was around 105.50, the risk was .30, I covered at 106.05, and the profit was 1.25, so a 4R trade in about forty minutes. Because of my ATP problems, I decided not to wait for the target to be reached. That is why I like high R trades—despite R’s being left on the table due to no fault of the trader, the trader has a higher chance of still catching several R’s resulting in an excellent reward to risk.
