This morning I created a “trade idea” video featuring a short setup in PETM. Here is how the trade actually played out for me. The idea behind the trade was there was a fresh catalyst causing bearish price action during pre-market trading, and a similar setup has yield excellent results recently in stocks such as DKS and INCY.
A very important part of the trading process is trade review which should take place after the market closes and you have some time to review each of the day’s trades. The below chart highlights the action points from my trading in PETM on the Open. I lost money on two short trades and one long trade. The long trade was born out of the strength I saw in PETM during the first 30 minutes.
- Initiated short on a spike to 58.70. Stop was placed above 59. This offer was placed prior to the market opening and the fact that it wasn’t executed until 9:50AM wasn’t a good sign. In this setup the best entries are usually in the first few minutes when stocks gapping lower attempt to bounce and fail. The time of the execution put me on guard a bit and decreased the likelihood of the trades success
- Stopped out of position
- It traded lower pretty quickly and not that a resistance area had been established I was prepared to give the short one more try with a stop above the high of the day
- Stopped again on the new high
- Decided to give the long side a try as the stock had made a new high around 10:20AM lowering the probability of a reversal. Also, the stock had sold off the day before earnings so I thought that the strong buying in the first 45 minutes may have been a result of many people getting out ahead of the earnings release and the numbers weren’t as bad as some anticipated.
- Stopped out of long
Upon review one thing that I should have done differently is stay away from the long side once PETM traded below 58.50. The strength from the Open should have resulted in no more than $1 pull back and a consolidation above this level.
Steven Spencer is the co-founder of SMB Capital and SMB University which provides trading education in stocks, and options. He has traded professionally for 18 years. His email address is: [email protected].
Steven Spencer is currently long CROX, HD, TWTR, WAVX, XOOM and short CRM, FEYE, GTIV, IWM, KO
2 Comments on “PetSmart Not So Smart?”
Not that I feel better after seeing that I was not the only one
“decieved” by $PETM, my story was a bit similar, shorted around 57.50,
stopped out at 57.72, flipped to long and got a small profit (I should
had hold but I chickened out), then a short higher, then same as Steve a
long on the top (with a small gain), and then my big mistake trying to
be long again, and then stare at the fast movement down from the top and
trying to wait for for a pull up (my sin…not respecting my stop and
letting my ego be on the way… ) had some important loss as you can see
(OUCH!), good lesson, to put always your rules before your pride 🙁 ,
in the end the positive side is that I think my reasoning was similar to
Steve´s, but for sure the difference is that he surely knows when to
run away from a big truck is approaching you 😀
Thanks for the review Steve!
Not that I feel better after seeing that I was not the only one
“decieved” by $PETM, my story was a bit similar, shorted around 57.50,
stopped out at 57.72, flipped to long and got a small profit (I should
had hold it longer but I chickened out), then I shorted a bit higher, then same as Steve tried for long on the top on assuming possible breakout (grabbed a small gain), and then my big mistake trying to be long again, and then only stared at the fast movement down from the top (!?) and trying to wait for for a pull up (my sin…not respecting my stop and letting my ego be on the way… ) had some important loss as you can see (OUCH!), good lesson, put always your rules before your pride 🙁 , in the end the positive side is that I think my reasoning was similar to Steve´s, but for sure the difference is that he surely knows when to
run away from a big truck when is approaching him fast 😀
Thanks for the review Steve!