The Plan
The play was to buy the stock around support at about 3.48 range - this was not a hard resistance line, but a general area of support. On 3/30, I purchase 500 shares for 3.51, and created a stop limit for 3.40 activation with 3.37 limit. This gave me a 4% downside. The next stop for this stock to me would eventually be back in the 4.10 region, this is the area where I had planned to sell which was about a 16% upside, thus, I entered the trade seeing a potential 4:1 risk to reward ratio. The stock was liquid enough that my 500 shares would easily be disposed of at any time.
Outcome
Both yesterday and today my stop loss came very close to triggering and I almost removed it so the shares didn't sell, however, the reason behind that stop was it was the location of both the 50ma and 200ma, which I was hoping would provide some support. A break-through that seemed to be to a bearish sign. Things were looking good early Wednesday afternoon as we glided up to 3.55 putting me back positive and seeing some decent size trades eating up shares on the ask. However, in the last 15-minutes, things deteriorated. The stock was soon flirting again with my stop loss and eventually triggered. I exited my position at 3.38 for an $85 loss with commissions.
Conclusion
My support line was not correct, or at least didn't hold up this time around. Its disappointing to have my first trade go against me, however, I am very satisfied with keeping to the stop and exiting the trade at a very minimal loss. I don't know if I could have done anything different, I stuck to my theory and stop losses and that's all I can ask for.
The next area of support I see is in the low 3.2x's. If the stock can find a bottom in that area, or establish a base somewhere else, it might be worth a second look. However, I do not like it being below the 50ma and 200ma. It has been able to ignore these trends in the past, so we will have to see. I still like this to try to get back up to the $4.00 mark again, so I may give it a try again soon.
