As we continue to gravitate towards more Trades2Hold, longer holding time periods for intraday trades, we found another excellent set up today in LXK.  This is a simple trade and a pattern you might spot a few times a week.  We will discuss the entry and the exit.  (let me state at the outset that for some reason I can’t type up the correct symbol of this stock.  All day I kept calling it by the wrong symbol and typing up the wrong symbol.  Weird.)

LXK announced positive earnings and gapped up.  It was at a 52 week high which is bullish technically for a stock.  29.80 was intraday resistance and Lexmark cleared this level.  We headed for 30 long and holding.  But then 30 presented the selling of a brick wall.  Hmmm.

30 lifted ever so slightly as SPY popped.  There was little interest to aggressively buy LXK above 30.  And an ARCA seller kept coming back to 30 with more inventory to unload.  Interesting.

The market continued to pop and LXK would not trade above 30.  30.05 was a price it would not trade above as most of the order flow was matched at 30.  With the market ripping and LXK at a 52 week high, why the heck wasn’t this stock finding higher altitude?

This presented a relative strength play.  LXK was much weaker than the market.  Also during earnings the pattern has been to sell the gaps.  Was this stock ready to reverse?

When the 30 dropped the bid LXK dropped out to 75c.

ALJ exclaimed, “What the hell?”

This was a very quick drop.  To me this signaled a failure from 30 and a Trade2Hold candidate as LXK retraced back towards 30.  I started a small position at 29,85c as the offer held slightly.  LXK found a way to touch 30 where I added some size.  I could not get the two lots that I wanted.  My 97c and 99c offers were not executed.  When a 94c buyer dropped I smacked the bids for another lot.

80c held the bid so I covered one lot there a hundred shares at a time as it kept holding and holding.  I held one lot.  After the significant volume at 30 this was a Trade2Hold for me.  I was going to give LXK a chance, even if I couldn’t type the dopey stock up on my Level II.

With a Trade2Hold we develop reasons to cover.  One reason to cover is if a stock breaks the intraday downtrend.  After LXK traded all the way down to near 29 I had lightened up a little.  I still was holding 3/4 of  one lot.

My 5 minute charts indicated above 40c was a break of the downtrend.  I set a stop for 1/2 of my position there.  65c was an important level on the way down so I set another stop to get flat.

Steve mentioned after we reviewed this trade that 20c was an area of consolidation to take some stock off the table.  You could decide to agree with him and exit some there.  My sense was that LXK had some more to fall so I held.

The market rallied into the close and I was stopped out at 41c and 66c.  Oh well.  The market has been weak of late so this gave me more pause to cover at 20c.

Above is my example of a Trade2Hold and my execution to exit.  You could have traded this with more size and covered in a way that makes sense to you.

In my review I should have added one more lot at 30.  I could have covered a little more into the steeper downmove close to 29.  

We received this tweet question today.

SkyTrader @smbcapital you guys trading $LXK at the close? crazy hold on the offer @ $30 (NYSE). wondering how you would play it tomorrow. thanks.

Tomorrow I will use this 30 as a significant level.

Best of luck with your trading!