I traded ROK today. It was an excellent trading stock. And it’s still acting well. Tomorrow if ROK holds above 23, then I will get long. At 20.60 the bid would not drop. This was the catalyst for an explosive upmove. I was in this move. Chop! And later ROK would not trade below 22.80. And I started a long position around this price and caught a nice upmove. Chop! But later I got caught in a fake breakdown. Let’s discuss.
ROK could not trade below 22.80. Previously ROK could not trade below 22.82. This 82c bid dropped but the 22.80 bid was held. ROK traded up towards 23.66. Then ROK traded back near 23. My alert went off. So I started to watch it again. ROK traded below 23 and I started to scale in. Below 22.80 was my exit price. I bought at 93c and 90c and 87c and 85c and 83c accumulating a nice position. The 22.80 dropped so I hit out of my long.
22.80 was my level and ROK was below. We are traders. Trading is not as simple as stocks always go to support levels and then hold. We must have the trading skills to be able to trade other scenarios. We must develop trading skills so if that 22.80 support level drops then we can reestablish if ROK is still strong. We must develop trading skills so that if the drop below 22.80 is a fake breakdown then we can reestablish.
ROK traded below 22.80. This was an important level. The market was weak. It was the midday. Last time the 82c bid dropped 80c held the bid. ROK was very strong today. These factors should make us skeptical that ROK would breakdown when the 22.80 level was violated.
ROK traded below 22.80. ROK traded down to 22.70. There was a lot of volume done around 22.70. This is odd. After a stock violates an important support level it generally drops quickly. 10c below the previous support is not an example of a stock dropping quickly. And then the buyers appeared to win at 70c. The 70c bid reappeared and held. This is another sign that the drop was a fake breakdown. So I got back in.
On our charts ROK is a short below 22.80. But with our trading skills we can reestablish our long position. We cannot reestablish with as much size as we did scaling into the 22.80 level, but we can get some stock back.
Trading is a skill. This was a difficult trade. I lost some when ROK dropped below it’s support level. But I reestablished and caught a nice move up towards 23.20. I did so because of my trading skills.
Best of luck with your trading.
ROK NEWS from Briefing.com:
Correction: Rockwell Automation misses by $0.03; guides below consensus (20.45 -5.59) -Update : Reports Q1 (Dec) earnings of $0.81 per share, $0.03 worse than the First Call consensus of $0.84; revenues fell 10.7% year/year to $1.19 bln vs the $1.26 bln consensus. Co issues downside guidance for FY09, sees EPS of $1.55-2.25 vs. $3.20 consensus; sees FY09 revs a revenue decline between 12-17%, which equates to roughly $4.73-5.01 bln vs. $5.3 bln consensus. (Briefing.com note: Earlier we said that guidance for EPS was $1.55-1.25, this was incorrect. We have deleted the original comment.)
