By: Scott Redler
On November 17th, we initiated a long position in AONE at around $14.75 per share, with a stop below that day’s low of $14.31. After a strong showing that day, the stock slowly trickled down to within striking distance of our out. This raises an important issue–often times traders panic and close out a position before it actually reaches their stop. A stop is placed for a reason, using a strategic level based on the stock’s price history and action. As such, traders must honor their stops.
Today, AONE received a contract from the Department of Energy and the stock ignited to the upside. There were several excellent intraday opportunities to add cashflow to our swing position in AONE. Take a look at the hourly chart to see how price momentum waned on the downside with the doji formed at $14.50 followed by a bullish engulfing bar. From there price accelerated higher once the $15 level was breached. Volume expanded as the move continued, further confirming a reversal of the recent down-move.
Update 12/8/09:
I just wanted to take one more opportunity to follow up on this trade. For those trading AONE as a swing trade, today is a great opportunity to get flat–we are selling on this move to the $19 gap. We have been following this trade ever since its November 17th reversal day and held onto a core position in our swing account. The small stocks have traded particularly well of late and as a result, we will continue to keep this one on our radar to seek out further opportunities.
