I received an email this morning from my most awkward student … I mean this guy is seriously awkward!
Just kidding – he actually suggested that I start off this email by labelling him that way so I’m calling his bluff.
Anyway, this is what he wrote in his email:
I’ve been long on F for several weeks but I can’t understand why it is not responding. It’s now looking bearish with so many red volume bars. As it’s one you mention frequently in your Webinars I wonder if you have any idea why the stock is doing so badly?
Here’s the reply I sent him, which he suggested I share with everyone:
Hi Mr Awkward *
Seems odd doesn’t it, but you have to accept what you see and act accordingly.
At some point you have to decide on how much pain you can accept from a stock, partner, football team, anything!
If it turns back up you may have another opportunity (or not) to get in (if you decide to get out). Depending on how you draw it, F could be right on a trendline starting either in June or August.
The OVI is very strong – and we now know for sure that the downward spike in early September is an anomaly, so there is strong uninterrupted bullish bias in the options transactions for F. But we are trading the price chart … always something to keep at the front of your mind.
Now look at the weekly chart: looks promising albeit with headline resistance around $19.
Bottom line is you have to accept that Mr Market is kinda ‘mentally unstable’, and our job is to make sense of it – and accept that sometimes it just won’t make sense for a while. You cannot will it to do your bidding, no matter how ‘wrong’ it seems to be behaving.
My personal view is that the chart is acting disappointingly right now but if I were the chart, I might argue back that so far it is still making higher highs and higher lows, with the OVI in support. That doesn’t mean I’d stay in it – after all we have a trading plan to stick to. But even if I am knocked out by it, I’d certainly be interested in another opportunity if it gives us one.
Hope this helps, Guy
* I did actually call him by his real name – which isn’t really Mr Awkward
This has echoes of the comments I’ve made about TSLA recently. In TSLA’s case it was beginning to look bearish but then it formed a Doji, with earnings coming on the 5th November, and therefore I say all bets are off until after earnings. This flexibility – not indecision – is what having a trader’s mentality is all about.
Many folks in trading cannot bear to be ‘wrong’. But trading is all about how to be wrong in small amounts. Take the ego out of your trading and you’ll be able to manoeuvre more nimbly. With TSLA it did break to the downside, but immediately popped straight back and is now acting unpredictably. With its earnings upon us it’s a coin toss. And trading for me is not about a coin toss as I need much better odds than that. So I get out with a scratch trade or tiny loss and wait for the next good opportunity.
I hope this helps everyone.
In the next few weeks I’ll have some exciting news about an independent study that’s being conducted around the OVI. Also, as I alluded to in my response above, the days of the OVI sharkstooth spikes are almost at an end as we’ve discovered what’s causing them. This is great news, which I’ll be explaining properly in due course.
Finally, my workshop is only four weeks away, and I’ll be setting homework for attendees in the next couple of weeks so you have plenty of time to prepare for the event.
So far over 90 people are confirmed for the event. Normally this would mean the actual room is full, but the majority have elected for the simulcast/DVD option, so there is still plenty of room in the actual room. If you haven’t booked already do click on the image below as there’s always a stampede in the last couple of weeks before the event.
All the best