My Response:
Just wanted to discuss trading in the first half hour a bit so there
isn’t any confusion about my strategy. If you’ve been a member here for
awhile you know that I won’t make a trade in the first half hour to hour
when purchasing a breakout. However, there will be times when making a
purchase in the first few moments of trading will be advantageous. When
a stock breaks out and makes a significant gain (such as in the case of
DCAI which vaulted 9% yesterday), it will often pull back significantly
in the first few minutes of trading at some point over the next couple of
days as traders take quick profits or the stock gets a valuation downgrade
from a brokerage (what I like to call a "red tag sale"!) and then recover
almost as quickly. If you missed a breakout the previous day or were
holding out longer to make the stock "prove itself" it can allow you to get in
at a price closer to the original pivot. So trading may occur in the first few
minutes under special circumstances.
Why not just purchase the stock at the breakout, which in the case of
DCAI would have been 24.78? You could have purchased at this price but
I believe it would have been a riskier trade. Considering the stock
failed to breakout successfully the first time I made the purchase, I
wanted the stock to prove itself yesterday by closing the day above the
pivot, which it did. Sure I take the chance of the stock getting away
and missing the trade completely, but it’s a risk I’m willing to make.
There are always other opportunities.
If you look at Grupo Aeroportuario (ASR) in the first few moments of
trading this morning, you’ll see it made a similar move. The scenario
was a bit different in that the stock was continuing the reversal at
resistance of 35 that it began yesterday, but it too returned to near
the pivot point in the first moments of trading today offering another
chance to get in. It wasn’t a trade I made in the Model Portfolio, but
getting in at 33.25 or so would have provided a nice entry point on a
technically superior stock.