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Written and copyright © 2009-2010 by Thomas N. Bulkowski. All rights reserved.
Backstory
Let me tell you about a trade I made in Coldwater Creek (CWTR, daily chart).
By late April 2009, many stocks had doubled in price and were bumping up against overhead resistance.
I show the stock hitting such resistance by the green line at point A.
When price closed above this region, I pounced and bought the stock. Since I was and still am concerned about the market, my position was just 1/4 of what it used to be a year ago.
Buy Again?
The stock moved sideways for several days as if trying to decide a direction, but then it found its legs and shot up. Midway though the rise, I doubled my position.
Since I was buying stocks often during that time, I did not fill in some of my notebook for the trade, so I do not know what my target price was.
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If you look at the longer-term chart (weekly, for example, going back a few years) you will see a loose congestion area from 3.40 in January 2008 to a high of 8.31 on September
2008. My guess would be a climb to 8, which is also the site of a small knot of congestion in October to December 2007. That tight area would concern me.
If I wanted to hold the stock for several years, then I would expect it to push through and top out at 19. That is where numerous valleys bottom starting in late 2005. Buying at
3.50 and holding to 19 sounds like a worthwhile endeavor to me. Of course, the stock, the company, the market, and the economy would all have to cooperate. That is a tall order but
in three years, who knows?
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Anyway, I let the stock flop around and then it started the second leg of what looked like a measured move up chart pattern. Notice that leg
B nearly matches the slope and extent of leg C. If the measured move up plays out as expected, price will retrace
back to the corrective phase -- which is the horizontal movement between B and C.
Time to Sell
I looked at the chart and took a tip from my day trading experience. I saw three candles with little overlap (the three days before the black candle when I sold).
That means a strong price run has begun. I placed a stop loss order a penny or two below the low of the white candle (the highest one on the chart), expecting to trail the stop
upward as price climbed.
The next day, I was stopped out when the f%^*ing thing hit my stop. I felt as if I was cheated out of a profit. Today (Monday night as I write this), the stock has rubbed salt into
my wounds by closing up 2.4% even as the Dow has tumbled 187 points.
On the first trade, I made 83% and the second one I made 61%, but I still feel as if I lost big.
Aftermath
Shown is a more recent chart of Coldwater Creek on the daily scale. I marked the two buy locations as well as when I sold.
Price cooperated and dropped to A after I sold which always brings warmth to my heart. But then it had the audacity to recover
and post a new high as the general market climbed.
According to S & P, they rate the stock a hold while Ford has a sell on it. S & P says that the company faces increasing competition and slower store growth in 2010, so
I threw it back on the discard pile instead of placing it on my shopping list.
Based on what I see, this stock could defy the rating agencies and continue moving up.
-- Thomas Bulkowski
Written and copyright © 2009-2010 by Thomas N. Bulkowski. All rights reserved. Don't you feel more like you do now than you did when you came in?
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