The “to fade” play

“Always make a total effort, even when the odds are against you.” – Arnold Palmer, American professional golfer (1929- )

While reviewing my Trading Journal for the week, I reviewed some comments that I had written about the THO (Thor Industries) short trade that I have on at the moment. Several individuals had commented to me regarding the trade setup in general as well as some specific questions regarding the trade so I thought I would review it here in more detail.

For those that follow me, you will at times see me make a twitter post where I note that I am putting a stock on my “to fade” list. To be clear here, if I am putting a stock on this list I expect a down move of price. There are several reasons that prompt me to put a stock on this list, but in the case of THO it was simply this: too big of a one day move makes it a target for profit taking in the following session. Simple.

So on to the trade idea. Here is my post on the StockTwits chart.ly stream on Sep 29 for THO:

 

I had drawn a box that encompassed some of the move for that day as some of the moving averages that would pose as some Resistance. “2 big a move” is what I saw and thus it made my “to fade” list.

The stock did experience some profit taking on Sep 30 and closed down 10% for the day closing within $.02 cents of the Thursday open price. Gave it all back.

Remember, this is just a trade. The bias is built on the fact that a stock makes an “outsized move” and has a HIGH probability to experience profit taking.

Have a good week and thanks for reading.

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