This week we began with a trade to the upside on QLogic Corporation (QLGC). The stock came from the Dedicated Trader's Key Level Stocks - Channeling Stocks. The research department tagged this as being a stock at or near the bottom of it's channel (not far from support)!. One look at the chart below certainly confirms that!



http://bobeldridge.com/bobFTP/images/qlgc_chart.jpg

Notice that the stock had, within the past few weeks fallen rather dramatically from resistance in the low $50's, slowing it's descent as it neared support in the mid $40's. Monday morning found us looking at a stock which for all intents and purposes was just waiting for any excuse to begin to rise once again! Take a look at a couple of clues ... First, the stock opened HIGHER on Friday morning, the last trading day depicted on the chart to the left. Easing to the downside slightly, it finally began to build trading momentum, eventually closing very near the day's high. Closing near the high for the day can be a very bullish sign, often foretelling a rise during the next trading session. Additionally, notice the very short term stochastics (In case you're wondering, I have mine set to 5, 2 and 2). You will see the stock near 'oversold', also very bullish.



As the market opened, we in the trading lab watched this stock with great interest, having bought 500 shares premarket @ $45.75. The thought was that if the stock began to pull back even further, we were only on the hook so to speak for 1/2 the position we would otherwise trade and a tight stop loss would give us an early exit from a possibly uncomfortable position. On the other hand, if the stock began to rise, we could then buy the other 500 shares and trade all 1000 to higher levels for the day's profits! I've included the day's trading below to show you how the trade progressed from the open.



The stock opened around $45.73 ... acceptable. notice that the price then began to slide ... unacceptable! By 9:35 am, I had placed a 30 cent trailing stop to avert any disasters, which is a good idea ... usually. However, it's ALSO a good idea to make the stop loss cover all the shares you want to protect. Trading on-line AND teaching a trading lab has a ton of distractions and somewhere in the process, I FORGOT to move the number of shares from the default 100 up to cover our entire position! Oh well...

By the time I noticed my error, the stock had slipped to around $45 and I had been stopped on 100 shares around $45.50 or so. That's when my lack of attention to detail became very obvious. I considered just pulling the plug on the remaining 400 shares, but by that time, the stock had started to recover. Look at the interday chart to the right and you'll see this happening just prior to 10 am. At that point, I decided that I had become an unwitting participant in the "stock-wiggle jitters", a condition which affects most NEW traders. Folks, let me assure you that this affects even the 'old hands' from time to time. It's always a good idea to be on guard against this and never consider yourself immune to the emotions inherent in ANY trading situation.

Happy Trading!

Bob Eldrdige