Ah, yes, there’s nothing I enjoy on Slope more than highlighting my shortcomings, character flaws, and personal screw-ups. Let’s get into another one, shall we?
May I direct your attention to the minute bar chart of Adobe (ADBE).
I see some of you are ahead of me already. Just stay in your seats and let me tell the tale anyway.
Now that the China trade “deal” is done (AKA back to how things were before), and the CPI/PPI are behind us, I allowed myself to get bolder in positioning. I’ve cranked things up to triple digits again, spread out among 20 positions. One of them, as you’ve already guessed, is Adobe.
In SlopeCharts, one of the dozens of cool features is that it will show you when earnings are forthcoming on any particular item, and it will show you how many days off it is. Although Adobe had a (0) next to it, making it plain as day that earnings were today (that is, 0 days in the future), I didn’t notice it until a few minutes after the closing bell.
I immediately became uncomfortable, because I’m not too crazy about holding on to positions on high-tech stocks on earnings days. For example, I deliberately avoided doing anything with Oracle this week, since I knew they were one of the stocks that for whatever reason had a weird earnings date (and it’s a good thing I did, because ORCL roared to lifetime highs today).
Anyway, when I saw ADBE had earnings, I took a look at my portfolio spreadsheet and saw that not only was I short it, but the position was uncomfortably large. I decided at that very moment that, at the very least, I should trim back on it to make it more appropriately sized, plus I wanted to reduce the earnings risk.
It was too late, though. I suddenly saw a huge spike on the price bar. The stock had closed at 413.68, but the bid price was suddenly 425, 428, 433, 435, 437, etc. I started freaking out and mentally kicking myself. I was suddenly in a pretty big short position on a stock that was up about $30 per share in a matter of moments, and for all I knew the damned thing would be over $500.
I logged into my brokerage account and decided that, yeah, this totally sucked, but I wasn’t going to totally close the position. Instead, I would close about 40% of it (at a loss, obviously) to at least “right-size” it and then be prepared for more lumps in the morning. I went to the special-order screen for after-hours orders, punched in the order, and managed to close out ADBE at $427, which is where I’ve marked the arrow above.
You already know what happened. After I covered, the bid was 425, 420, 415, 410, 405………….Jesus Christ! The explosive move up in the stock had, out of the blue, changed into a stock that was dropping, and this was all in a matter of moments. I have no idea what on earth compelled the market, equipped with a specific and unchanging set of data from the earnings report, to bid ADBE up like mad and then, just as quickly, dump the hell out of the thing.
So……………..I…………..was……………pissed. At myself, naturally. Me. Good ol’ Tim.
The reason why is plain as day, right there on my trading rules page.
And what are those four rules, in short? Well:
- Let the stop price do its work – failed. I cancelled the order (intended for normal trading hours, naturally) and shoved in my own bespoke order in the midst of panic.
- Avoid off-hours trading – failed.
- Emotional awareness – failed.
- Impulse is your enemy – failed.
Hell, I even managed to violate some of the “retired” rules on the page, such as “Take Thirty” (wait at least 30 seconds before taking action). I seriously couldn’t have screwed it up more badly.
Now, in my defense, for a stock to go from +30 points to -10 points in the span of a few minutes for no particular reason is unusual, to say the least, but unusual or not, the simple fact is that I’ve put these rules together for a reason, and it is PRECISELY at such uneasy, scary times that the rules need to be trotted out, read, and obeyed.
There are very few constant truths in life, but there is this: I absolutely rock as a chartist, and I (often) stink as a trader! Respect my charts. Ignore everything else!
