Did My Exit Make Sense?

Yesterday I had an alert set for BIIB at 192 as it was support into the Close the previous trading day. In stocks that are in strong uptrends I like to buy at this price level if I see support on the tape. After pulling back to 192 BIIB moved sideways for over an hour moving above and below this important level. I got long at 192.10 with a stop below 191.80.

The market closed with BIIB at 191.70 and I decided to take the position home. One of my points of emphasis for 2013 is taking advantage of more swing trades in this low volatility low risk environment (see #NewNormal posts from january). When I turned on my platform this morning I saw BIIB print at 194.70. I figured it was just some poor rookie with a fat finger punching up stocks at 8:00AM as I didn’t see any news. Nope. It foreshadowed the move that started a few hours later.

As the market opened BIIB was offered at 195.30 and bids were probably 30 cents lower with the typical lack of liquidity that we have grown accustomed to on the Open. I offered my shares at 195.25 and got taken. I felt like I got a good print but also immediately felt like I would regret the sale shortly. In the next 10 minutes it actually dropped out to 194.25 so I had an opportunity to re-enter my position at a much better price. I passed as my focus was on HUM right on the Open. Then after about a one hour of tight consolidation BIIB broke above its Opening Range and began a strong uptrend for the day. I did not get back in.

One of the seven SMB Fundamentals that we teach traders on our desk is “a detailed trading plan”, which covers if a stock trade for or against you. I had a clear picture of what I would do with BIIB if it traded against me but I think the plan for if it trade for me wasn’t up to snuff. I knew that today I would be on and off the desk dealing with firm business, which probably partly contributed to my taking the sale as I knew I might not be able to effectively manage the position throughout the day.

Nevertheless my intention for buying at the 192 level yesterday was to enter a swing position and not simply take advantage of an overnight gap and sell the next morning. The correct way to trade the stock would have been to place a stop below the morning low and allow it to trend for the rest of the day. I am not the kind of trader who frets about selling to early or too late as long as it was part of a well thought out trading plan. I would rather take a loss and trade my plan than capture a few extra points doing something that makes non sense from a risk/reward perspective.