Playbook exercise RHT
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Playbook exercise RHT
- 1. A Playbook Exercise By Jake Huska
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- 3. Look at the longer timeframe (daily/weekly) to identify clear inflection points on the chart. For an In Play stock that is gapping higher or lower, look at the post-market price action in relation to the longer term price levels. The risk/reward can be heavily skewed in your favor near these inflection points. Generally, the greater the range between these inflection points, the more risk you need to put on.
- 4. SPY was fairly quiet. $169.50 had been prior resistance back in mid September and had acted as support yesterday. Below $169.50, there was $169. Above $170.20, $170.50-$170.65 was the next micro resistance zone. Coming into today, SPY had been down 3 days in a row.
- 6. ◦ Red Hat has reported a second-quarter EPS of $0.35, beating the Street's estimate of $0.33 by $0.02. Earnings per share were up 25 percent from the same quarter in 2012. Red Hat's revenue came in at $374 million versus the Street estimate of $372.11 million. Sales were up 16 percent year- over-year. Source: benzinga.com
- 7. Looking at the daily chart, $47 was a potential level of support. $45.50-$45.80 was an even bigger level on the daily. 1.20-1.50 range between these two inflection points, which should offer nice r/r opportunities.
- 8. The above is a daily chart.
- 9. The after-hours/pre-market action was bearish, as sellers were in control. Stock was trading below the after-hours consolidation, indicating that sellers were in control on a short-term basis. $48 acted as some resistance pre-market, so looking for shorts near the level made sense with a point of potential downside until the next support level. Could walk into something bigger if there is a flush below $47 down towards the bigger support zone at $45.50-$45.80.
- 10. RHT was relatively “clean” on the open with offers holding lower. $47.70 held, then $47.50, which led to a quick flush below $47 of about 30 cents. The stock was pretty choppy later in the day.
- 11. The above is a 1 minute chart.
- 12. I feel like I did a good job identifying the important inflection points, both on the longer- and shorter-term timeframe. I believe I managed the trade well by covering 2/3 of my position into $47 as well as in front of $46.30 once I spotted some buying on the tape. I think I did a good job later on when I reloaded on the short into the retracement and held it below $47, based on the trade idea of new lows.
- 13. I could’ve tried a bit more to short a small lot in the pre-market at $48 to be in a position of strength at $47.70. I could’ve done a better job of adding to my short once it held lower at $47.50 on the open.
- 14. I would continue to use $47 as an inflection point. Perhaps they will spike it up on the open, but if it’s sold and clearly holding below $47, I’d look to initiate a short with the expectation of yesterday’s lows getting taken out. $45.50-$45.80 would be my “hopeful” cover zone. Could look to the long side if it’s holding above $47 and takes out $47.50.