Wednesday, October 20, 2010

Missed Out on Correct Short of OpenTable (OPEN)

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A reader just highlighted the chart of OpenTable (OPEN) to me.  Always instructive to see 'mistakes' so we can see what (if anything) is to be learned.  Due to the melt up in the market I have very tight stops in my shorts and that is costing me 2-4% on most as they stop out usually within 2-3 days during this 7 week rally.   Most of the time this has saved me from much larger losses, but in the case of OpenTable a "gap" that was I was hoping to be filled did happen - just without me.

Replay:

On Thursday Oct 7 I shorted the stock at $61.90 as the stock broke below the 20 day moving average, with intent to cover just under $57.50.  Chart at the time.



2 sessions later Monday Oct 11 I was stopped out for a 2.8% loss as the stock broke over the 20 day moving average which I was using as my 'stop loss' area.



The stock stayed over the 20 day for 4 sessions, so I felt content in my decision.  But I missed the chance to reshort when it broke down below last Friday.  Frankly it was the EXACT same set up that I originally shorted (a break below the 20 day moving average) but this time it would have worked, as it led to a waterfall selloff.  Finally that gap was filled.  Without me.



Lessons learned?  I will get back to you after removing my head from the wall.  Some combination of lack of patience, too tight of stop loss, getting sick of losing money on the short side, and nightmares involving Bernanke pointing a bazooka at me are involved I am sure.  All you can do in the market is put your money behind probabilities - the same set up essentially occurred twice within 2 weeks.  The first one I took did not work, the second one I did not take did work.

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