When you see this sign, a proper U-turn is allowed.
What about in stock trading? What does a U-turn have to do with trading? This term describes a trade where a position is taken in a stock, executed, and then exited. Then a new position is taken in the opposite direction of the initial trade, hence the U-turn view on the stock movement.
I executed this strategy in GDI last week, and found myself with an opportunity to do a U-turn trade in NFLX today. I have been short since earnings, and posted the following chart earlier today:
On twitter I noted to play the impending bounce or failure. As it sat at this level, I began to cover some of my short position, and continued watching the action on the 5 minute chart. The bounce occurred and I set my stop at 230 on the remaining short – which ultimately hit as moved up through and in to the 233 range.
A missed U-turn trade opportunity as I never played the bounce. In reviewing my execution on this trade, the mistake I made was in not determining my target and playing it once hit. Had I set my strategy to exit at the 50 day moving average, I would have been clearer in my approach to the stock movement.